The consumer car finance industry experienced a setback in May, with both the volume and value of new business declining by 4% compared to the same period last year. According to the latest data from the Finance & Leasing Association (FLA), the total value of advances amounted to £3.245m, financing a total of 175,297 cars.
Breaking down the figures, it was found that new car finance business by value increased by 6% year on year, reaching £1.457m. However, the number of cars financed saw a 2% decrease, totalling 53,042. On the other hand, used car finance new business value experienced a 10% drop at £1.788m, with the number of cars financed declining by 5% to 122,255.
Geraldine Kilkelly, the director of research and chief economist at the FLA, commented on the market’s performance, stating that “the point-of-sale (POS) consumer car finance market has seen only a slight fall in new business volumes in 2024 so far.” She also noted that the finance penetration of the private new Battery Electric Vehicles (BEVs) market has been on the rise. Kilkelly highlighted that the most popular way of obtaining a new BEV is through a salary-sacrifice scheme.
Furthermore, the FLA’s latest research indicates that the POS consumer car finance market is expected to maintain the value of new business at around £39bn in 2024. This is supported by improved consumer confidence and the projected lower interest rates, along with the continuous growth of real earnings. Kilkelly emphasised the importance of open communication between customers and their lenders, encouraging those who may have concerns about meeting their payments to seek assistance as soon as possible.
While the decline in car finance new business volumes and value may raise some concerns, it’s crucial to keep in mind that the market is subject to various factors that can influence its performance. As consumers continue to navigate the economic landscape, staying informed about the latest trends and developments in the automotive finance sector is vital for making well-informed decisions. By closely monitoring the market and seeking guidance from reputable sources, individuals can better manage their financial commitments and explore suitable solutions for their specific needs.