John Simpson discusses current trends in the car industry, opportunities for motor finance providers, and what to expect in the coming months
The automotive industry suffered a challenging few years during the recession, but with performance continuing to improve and high car sales recorded this year, confidence has returned to the sector.
Go deeper with GlobalData
Access deeper industry intelligence
Experience unmatched clarity with a single platform that combines unique data, AI, and human expertise.
Recently, however, the industry has been unsettled by findings from Experian, which revealed that used car sales were down 3% in Q2 this year, while August saw the consumer used car finance market experience its slowest growth rate in 2014 to date.
Yet despite the slight slowdown, the strength of certain segments in the market is indicative of overall growth within the motor industry, which will continue into 2015.
Interestingly, changing consumer trends have seen an increase in the used MPVs and 4x4s segments. As motorists have more disposable income, these larger cars can fulfil the needs of their changing lifestyles, as they are often perceived as a safer choice for families. Similarly, a greater concern for the fuel economy and the environment has resulted in a notable uptake in sales of used electric and hybrid cars.
This growth is underpinned by wider confidence in the market, aided by strong levels of GDP, low inflation rates and consistent interest rates. As economic conditions improve, the rest of the UK car industry continues to grow.
US Tariffs are shifting - will you react or anticipate?
Don’t let policy changes catch you off guard. Stay proactive with real-time data and expert analysis.
By GlobalDataThe British Car Auction’s Used Car Market Report 2014 recently revealed that sales have hit a nine-year high, reaching a record market value of £42.7bn. This is also matched in the new car space, which has shown 31 consecutive months of growth, and is on track to make 2014 its best year since 2004.
These trends will continue to have a correspondingly positive impact on the motor finance sector. As car sales increase, record numbers of customers are choosing to buy their cars on credit. So, although the growth of the consumer used car finance market slowed in August, it is still expanding at a significant rate and shows no sign that this will stop.
The consistency of this growth creates an opportunity for finance providers to expand across the entire lending sector, from the prime market through to the non-prime sector.
Having provided lending facilities to drivers with weaker credit scores in recent years, at a time when other lenders were retracting from the market, Moneyway is now expanding across the risk curve by increasing its credit limit from £15,000 to £25,000 in the prime sector. The business is also lending across a wider range of vehicles, including older cars and different categories in line with changing consumer trends.
Overall, trends indicate that growth is firmly on the agenda for the used car industry for rest of 2014 and into next year. While this continues, motor finance providers should also expect to see motorists applying for credit in growing numbers and across a wider range of vehicles.
John Simpson is managing director at Moneyway
