Finance Packages Worth £16.2 Billion Taken Out by British Motorists
Last year close to a million new cars sold in the UK were purchased using some form of finance deal, according to figures published this week by the FLA. This equates to a total of £16.2 billion, or a typical value of £16,500 per buyer.
80 per cent of new cars are now purchased using finance of some kind, although industry insiders are warning that those who want to buy used vehicles should be aware of the fact that a growing number of second-hand cars may be linked wit unpaid debt.
Last year there was a 10 per cent increase in the number of finance packages taken out by car buyers, which went hand in hand with a 16 per cent boost in the number of incidences of cars being sold with outstanding payments still to be made on the original deal. This is according to a separate study conducted by My Car Check, and this should act as a warning to motorists who are thinking about investing in a used car.
The interesting thing about the figure relating to the increase in finance deals provided by the FLA is that it does not take into account the commercial sector but instead focuses on the private purchases of vehicles made by people looking for a car for personal use. When cars registered by businesses which were bought using finance are taken into account, the total jumps up by 50 per cent.
In fact, even if business buying habits are ignored, consumers are still helping to stimulate the market, with December of last year seeing a rise of almost a quarter in the number of car finance deals being taken out.
The result of this is that the vast majority of the new cars which hit the road in the UK each day are not owned by the driver outright but are instead subject to finance packages worth billions.
People are also increasingly taking advantage of finance to purchase used cars, with an eight per cent rise in this market over the past 12 months.
FLA spokesperson Geraldine Kilkelly said that the figures were not as shocking as they might seem, since they reflect an ongoing trend in the UK car market. And in fact, she pointed out that growth in finance deals was actually slower last year than it had been in 2014.
A combination of low inflation, favourable interest rates and low levels of unemployment is helping to raise consumer confidence, enabling more people to take advantage of finance packages throughout 2015 and particularly in the final months of the year, Kilkelly explained.
At the moment, the FLA is predicting a similar 10 per cent growth in finance adoption in 2016, although there are fears that this will lead to growth in the number of risks that used buyers face when they decide to make a purchase.
Industry expert Roger Powell claimed that buying a used car as part of a private arrangement was becoming a trickier process for motorists to negotiate, particularly in terms of the danger of finding out that a vehicle is still subject to a pre-existing finance package.
In particular, he pointed to the problems associated with PCP (personal contract purchase) finance packages as being relevant in this respect.
The rise in spending and use of finance for new car deals are having a range of effects on the used market, with the average value of second-hand models rising by almost £800 in the past year alone. And the incentives offered by manufacturers and finance firms can mean that people are more willing to buy a new car on a regular basis rather than waiting for longer periods between purchases.
Wise car buyers will shop around to get the best finance offers and also investigate second-hand models to make sure that they are free from debt.