In June 2022, the UK new car finance market recorded its ‘largest contraction’ in new business volumes since February 2021 as market recovery remained disrupted due to vehicle shortages.
Data released by trade body Finance & Leasing Association (FLA) shows that new business volumes for new and used cars slumped 12% year-on-year to 189,182 units in June 2022.
The consumer new car finance market fell 21% by value to £1.43bn and 28% by volume to 56,877 YoY.
While the consumer used car finance was up 10% by value to £2.05bn, it was 3% lower by volume in comparison with June 2021.
In the first half of 2022, new business volumes in this market were 12% higher than in the same period of 2021.
FLA director of research and chief economist Geraldine Kilkelly said: “Consumer spending is expected to weaken during the second half of 2022 as incomes are squeezed by higher inflation, interest rates, and taxes.
“Our Q3 2022 industry outlook survey suggests 56% of motor finance respondents expect growth in new business over the next year, down from 76% in the Q2 2022 survey.”
Commenting on FLA’s data, UK-based digital lending marketplace Freedom Finance chief revenue officer Michael Davidson said: “Motor finance has a crucial role in enabling more people to buy vehicles by spreading the cost of payments. For customers, shopping around is vital to ensure they are getting the right deal for them at a competitive rate.
“Technologies are improving and marketplaces can now quickly offer a range of products that customers will definitely be eligible for via a single application that does not damage their credit score.
“Many successful car dealerships have also put in place embedded finance partners that can meet their customers’ demands for quick, simple access to a range of different car finance options as well as other financial services, so that their customers can get the best deal at source at any stage of the purchase journey.”