Finance firms must address
drop in public’s appetite for major purchases.
Consumer confidence levels took a
spectacular fall between December and January, driven in particular
by a record plunge in the public’s appetite for major purchases,
including cars.
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But historical data shows the motor
finance industry has weathered similar collapses in confidence over
the last three years, and there may even be a case for saying the
current situation could increase finance penetration of motor
retail as customers look for new ways to make purchases
possible.
The consumer confidence barometer,
published each month by market research firm GfK NOP Social
Research, records consumer confidence as a figure aggregated from
five indices.
One of these indices – representing
consumers’ confidence in making large purchases in the months ahead
– suffered its biggest drop in three years between December and
January, dragging the barometer as a whole to its biggest monthly
fall since 1994.
Nevertheless, comparing GfK’s large
purchase confidence index (LPCI) against SMMT new car registrations
and FLA new car finance statistics over the past three years, there
is only minor correlation between confidence troughs and dips in
finance sales.
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By GlobalDataRelatively strong performance in
LPCI at the beginning of 2010 seems to correspond to a particularly
strong March sales peak for the finance industry, while the LPCI’s
lowest trough in the last three years (between October and November
2008) was followed by the FLA’s lowest total of new car finance
sales in the same period during February 2009.
Commenting on the January
confidence index, Alphera director Spencer Halil said: “Surveys
such as these can make uncomfortable reading, with a lack of
practical advice on the steps that can be taken in order to
mitigate alleged dips in consumer confidence.”
For finance companies, he said: “It
is a case of presenting all the benefits from a range of finance
solutions that make buying a car less intimidating and more
affordable.
“Rather than looking at the results of this survey as a sign of
tough times to come, dealers and brokers should recognise this as
an opportunity to up their game and promote the right finance
solution,” Halil added.
