New car finance volumes increased by 8% year-on-year during the first 12 month period of 2015, according to figures released by the Finance & Leasing Association (FLA).

This came after double digit growth in June, during which the number of cars financed increased 15% year-on-year to 84,526 cars, and the value of the finance increased by 20% to £1.4bn.

The penetration rate for the 12 months to June reached a record high of 78.1%. Putting this figure in perspective, the pre financial crisis penetration rate in 2007 stood at just 47.9%.

Speaking to Motor Finance, Geraldine Kilkelly, head of research and chief economist at the FLA, said: "The most recent SMMT figures are fairly flat for private new car sales, at about 1% in July, and about 4% over the last 12 months. If we were expecting the finance market to grow say 8% overall, as it happened over the first 6 months, then you’d expect the rate to be up to around 80% by the end of the year. We don’t do formal forecasting on that, but on current trends I wouldn’t be surprised if that was 80% by the end of the year."

PCP remained the most popular product, above HP, with around three of every four cars bought on finance done through PCP, she said.
Kilkelly said: "PCP as a product has been around for more than 20 years. But certainly over the last 3-4 years you’ve been seeing levels around 60-70% of new business being provided through that product."

The used car market also grew in June. The number of used cars bought on finance grew by 7% year-on-year to 97,616. The value of the finance grew by 14% over the same period to £1,040m.

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Kilkelly said: "In the used car finance market, Q1 and Q2 growth is fairly steady at 8% and in the final quarter of last year it was 8% as well. It’s fairly steady, although it’s not as strong as it was at the beginning of 2014. But we’re still seeing fairly robust growth."

Discussing the product usage in the used car market, Kilkelly said the new product remained HP, which accounted for just under 60% of all used car finance. PCP accounted for approximately 35% of business. She added: "for the first six months of the year, PCP was up 29% in the used car market, while HP was growing by about 9%.

When asked whether all this growth was roughly in line with FLA expectations, Kilkelly said: "We have a confidence survey which we send to senior executives to gain opinions on how they see growth going. Certainly we were expecting the market to still grow both in the used and new car markets, but at slower rates than we’d seen in 2014. This is very much what we’re seeing so far."

The first half of 2014 saw year-on-year growth of 17% for new business volumes, compared to year-on-year growth of 8% for the first half of 2015.