The uptake of PCP loans to finance vehicles in the first quarter of 2013 was up 77.33% compared to the opening three months of 2012, according to the Motor Finance Index published by Experian Automotive.

The motoring information division of the credit reference agency added HP loans rose by 24.66% over the same period.

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There was a marked rise in used cars, with PCP loans in Q1 up 70% year-on-year and HP loans up by 30%. The figures come as vehicle valuation firm CAP has advised a rise in used sales has renewed positivity in the second-hand market, following a dip attributed to the power of finance deals to attract consumers into the new car market.

Affordability

The rise in PCP and HP has come at the cost of lease, contract hire and credit sale packages, which have declined over the past two years and Experian has attributed to motorists’ preference for more flexible deals with lower monthly costs.

Andrew Ballard, principle consultant at Experian’s automotive business said: "Our analysis has highlighted an upward trend that redefines the importance of affordability and choice as well as challenging the concept of absolute vehicle ownership in the UK.

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"The rapid growth in the popularity of PCP loans may stem from the repayment method, as instalments help motorists manage their costs and can keep regular payments low, the longer the selected term and flexibility in the deposit and final payments options."

This affordability has been widely identified by lenders in the past two years as an attraction for customers to finance, from motorbikes to electric vehicles, in both prime and non-prime.

Further analysis and data from the Experian Automotive Motor Finance Index will be published in the July issue of Motor Financemagazine.

richard.brown@timetric.com