Consumer car finance new business volumes grew in August 2022 by 5% compared with the same month in 2021, new figures by the Finance & Leasing Association (FLA).
The corresponding value of new business increased by 13% over the same period. In the first eight months of 2022, new business volumes remained 5% higher than in the same period in 2021.
The consumer new car finance market reported growth in new business of 2% by value, but a fall of 6% by volume in August compared with the same month in 2021. In the first eight months of 2022, new business volumes in this market were 6% lower than in the same period in 2021.
The consumer used car finance market reported new business up 19% by value, and 8% by volume in August compared with the same month in 2021. In the first eight months of 2022, new business volumes in this market were 10% higher than in the same period in 2021.
Geraldine Kilkelly, Director of Research and Chief Economist at the FLA, said: “In August 2022, the consumer car finance market reported growth in both the value and volume of new business for the first time since March this year, buoyed by another strong performance by the consumer used car finance market. Growth in average advances provided for consumer new and used car purchases remained robust despite some softening in the growth of new and used car prices.
“During the coming months when many consumers may be facing increased pressures on their household incomes, the motor finance industry remains committed to meeting the demand for the financing of car purchases and providing targeted support to customers who may need it.
“As always, customers who are worried about meeting payments should speak to their lender as soon as possible to find a solution.”
Michael Davidson, chief revenue officer at Freedom Finance, a digital lending marketplace provider, said that growth in the auto finance market and the rise of embedded finance was playing a “major role” in supporting motorists.
“Auto finance has a major role to play in meeting the demand from people looking to buy new and used vehicles by spreading the cost of payments in a flexible, tailored way. The market has seen significant growth and innovation to broaden the range of products that are available and there are now more bespoke options that can be arranged to suit a customer’s personal circumstances.
"Technologies are improving and digital marketplaces can now quickly offer a range of products that customers will definitely be eligible for via a single application that won’t damage their credit score."
Joanne Robinson, director of lenders at car finance marketplace Zuto, said as a trend, the boost to consumer car finance new business volumes by the used car finance market, is likely to continue once the supply of electric vehicles (EVs) increases.
"Interest in EVs is high, with the 2030 deadline to ban new ICE vehicle sales. Over half (53%) of our customers said they would consider buying an electric or hybrid car in the next 2-3 years, which clearly shows that there is growing demand. However, new electric models are too expensive for many drivers, while the demand for used EVs currently far outweighs supply.
"EV manufacturing is growing and we’ll soon see an influx of new models on the market. This, and a sharp increase in corporate plans to add EVs to fleets will cause a trickle-down effect into second-hand supply.
"Customers will have a lot of questions about battery range, charging infrastructure, servicing, long-term battery life and the future value of the EV. With the cost-of-living crisis, more of our customers are inquiring about whether interest rates are fixed, or are subject to increase, throughout the duration of their agreement — to safeguard themselves from future financial risks. At Zuto, we only present fixed interest options to customers.
"Most lenders today have already developed the right products and could offer finance on a second-hand vehicle. However, while they wait alongside dealers for sufficient supply to arrive, it’s important they make sure they are prepared for the customer inquiries for when the market takes off," Robinson said.