Point-of-sale (POS) consumer new car finance grew 11% by volume and 16% in value during the first half of 2016, according to the Finance and Leasing Association (FLA).

In the 12 months to June 2016, the percentage of new car sales financed by members of the FLA through the POS rose to 84.9%, up from 84.3% in the 12 months to May of this year.

In terms of product breakdown, PCP continued its dominance of the new car market over the 12 month period. 76% of all new car finance by value was PCP, up from 75% in the twelve months to June 2015. Personal leasing, or PCH, grew its market share from 5% to 8% over the timeframes.

The growth came at the expense of traditional HP, which saw a drop both in terms of market share and absolute value. £2,557m of HP was conducted in the 12 months to June 2016, making up 15% of the market. This compared to £2,732m worth of HP in 2015, or 18% of the market.

According to Geraldine Kilkelly, head of research and chief economist at the FLA, this wasn’t a surprise, as HP fell by 11% over 2015. In fact, she added, HP sales were only down 1% in the second quarter of 2016, meaning the rate of contraction was slowing.

Looking at the new market overall, Kilkelly said: “One of the strong points of point of sale consumer finance is you've got a range of different products being offered. It accommodates the changing attitudes we've seen before in consumer thinking towards car ownership. So you've got the likes of leasing and PCP coming on strong, but I don't see HP disappearing, it'll still be a strong offer for those who want to own their car outright.”

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The FLA reported that 88,531 new cars were sold on finance in June 2016, an increase of 5% on the same month in 2015. The value of advances in this market grew to £1.5m (€1.8m), up 10% from June 2015.

The POS used car market also experienced growth, with the FLA reporting H1 2016 new business growth of 14% by value and 11% by volume.

For the twelve months to June 2016, the used car market also saw a growth in PCP, albeit from a lower base than in new car. For this period, 40% of the £12,965m  worth of used car finance sold was on PCP, compared to 35% of the £11,381m in the period before. HP’s market share fell from 58% to 56% over the period.


Kilkelly described the first half performance as ‘strong’. She said: “In terms of the growth of the market overall, we've seen consumer confidence remain relatively strong it he first half of 2016, we've had a continuation of low interest rates, low unemployment rates, and low inflation rates, which have helped support consumer confidence and growth in the market overall. 2nd quarter GDP have come out strong. So general economic environment and  the supporting consumer confidence have helped the market a great deal.”

This growth has been in the context of flat or declining private car sales, and as a result finance penetration in new has jumped from 81.4% for the 12 months to December 2015, to 84.3% for the 12 months to May 2016.

Kilkelly adds; “It goes back to how consumers now think about car ownership. They're not wedded to owning their car. They're happy to have this choice of being able to lease or rent it, or with a PCP option to buy it at the end of the period. There is just a great range with consumers are now buying into.”

The FLA expected single digit growth for 2016, and expects a slower pace of growth in the second half of the year for both new and used.

Looking ahead, the EU referendum result is a dark cloud which is causing a number of people to be more pessimistic about the future.

However in the immediate short term Kilkelly notes; “The latest SMMT figures are interesting. You have some indicators about consumer confidence showing a big fall in the immediate aftermath of the result, but actually those SMMT figures were fairly steady pitched, there wasn't a significant fall in activity, and they were pretty much on trend. “

To this, she adds: “It's still early days, and so we're still expecting that overall in 2016 we'll see single digit growth. So there will be some slowing in the pace of growth, but we don't expect to see significant falls.”