The number of used cars sold on finance rose for the fourth consecutive month in October, though the new car market finance weakened after a September boost.
Finance & Leasing Association (FLA) statistics for October reveal that used car finance increased 7 percent by value and 11 percent by volume in October compared to October 2009.
The rise comes after the Government’s scrappage scheme led to a shortage of quality used cars. With the ending of scrappage and against a backdrop of rising VAT, the FLA said, consumers are buying more used cars.
October sales of new cars on finance dropped 11 percent compared to October last year, although the market was up 22 percent in the year to October 2010 compared to the previous twelve months.
But there was good news for motor finance providers, with the percentage of private new cars bought using dealer finance topping 50 percent for the first time since July 2009.
The number of new cars bought on finance by businesses fell by 11 percent in October compared to October 2009. The business used car finance market also reported a 34 percent reduction in volumes over the same period.
FLA head of motor finance Paul Harrison said: “The continued revival of the used car market reflects a return to traditional buying habits, as buyers look to manage their budgets by seeking out affordable cars and finance. Until recently, there was a shortage of popular models of used cars and this drove up the price. The end of the scrappage scheme has led to a rebalance of supply and demand.
But motor lenders’ Christmas cheer will be tempered by the prospect of a tough market in the New Year, as the VAT rise takes effect and public sector spending cuts impact on people’s pockets.”