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Published by: Mintel International Group Ltd.
Published: Jan. 1, 2003 - 97 Pages
Table of Contents
Introduction and Abbreviations
Report coverage and definitions of car finance options
Global information and research
Consumer research
Abbreviations
Executive Summary
Consumer confidence driving demand for car credit
The consumer car finance market achieved nearly £12 billion by gross advances in 2002
Hire-purchase is the most popular product type
Car finance is predominantly sold through dealers, though new channels are gaining
prominence
POS car finance is provided by specialist motor finance companies and captive manufacturer operations
Figure 1: Estimated market share of the top providers of point-of-sale car finance - total market,
2002
A market under increasing competitive pressure
The main findings of Mintel's consumer research
The future promises mixed fortunes for providers of POS car finance
Market Context and the Main Market Drivers
Lowest interest rate in nearly 40 years has lifted consumer confidence
Figure 2: Quarterly consumer confidence and average retail bank base rate, 1983-2002
Consumer spending set to slow slightly
Figure 3: PDI, savings and expenditure, at constant 1998 prices, 1998-2004
Expenditure on vehicle purchasing
Figure 4: Consumer expenditure on vehicle purchasing, at current and constant 1995 prices, 1995-2001
Expansion in the car market has benefited point-of-sale car finance
Figure 5: Trends in UK population and car parc, 1998-2007
Two cars per household on the increase
Figure 6: GB household ownership of cars, 1996-2002
A third more licence holders since 1985 has driven demand for car finance...
Figure 7: Full driving licence holders, 1985/86-1999/2001
...and yet test pass rate has declined over the past decade
Figure 8: Driving tests and pass rate, 1990-2001/02
Used car registrations comprised over 70% of total car registrations in 2001-02
Figure 9: Volume comparison between used and new car registrations, 1997-2002
Private market accounts for the largest proportion of new car registrations
Figure 10: Comparison of fleet, business and private new car registrations, 1997-2002
Recent legislative changes have opened up the car market
Market Size
POS car finance versus personal loans
Figure 11: New consumer finance, by FLA members, 1997-2001
Strong demand for new car credit in 2001-02
Figure 12: Consumer car finance gross lending, by sector, 1997-2002
The difference between the number of new and used cars bought on finance narrowed considerably in 2000-01
Figure 13: Number of new and used cars bought via car finance, 1997-2002
Average car loan balances experiencing moderate growth
Figure 14: Average loan value, by sector, 1997-2002
HP constitutes two thirds of new car finance...
Figure 15: Distribution of new car finance, by type of product and gross advances, 2001
...and an even greater proportion of used car finance
Figure 16: Distribution of used car finance, by type of product and gross advances, 2001
Annual growth rates vary from year to year and from product to product
Figure 17: Value of consumer car finance - new and used cars, by type of product, 1997-2001
The Major Providers
Direct lenders versus point-of-sale providers
Increasing consolidation in the car market
Figure 18: Links between car franchises and finance houses, 2002
The top seven providers control an estimated 87% of the market
Figure 19: Estimated market share of the top providers of point-of-sale car finance - total market, 2002
Profiles of top four independent car finance companies
Black Horse Motor Finance
First National Motor Finance
Capital Bank
GE Capital
Distribution and Promotion
The franchised dealership is the main distribution outlet for new car finance
Figure 20: Number of franchised dealership outlets and average sales per outlet, 1997-2001
Ford has the largest number of franchised outlets in the UK
Figure 21: Number of franchised outlets, for 20 largest marques, 1997-2001
Car importers and online dealers
The used car market and the growing importance of car supermarkets
Banks and high street retailers
Car manufacturers and dealers spent £3.4 million on advertising in the 12 months to October 2002...
Figure 22: Top ten car finance advertisers at the point of sale, 2001 and 2002
...but direct lenders and other intermediaries spent considerably more
Figure 23: Top ten advertisers of car credit (direct lenders), 2001 and 2002
The Consumer
Three in five British adults privately own a car
Figure 24: Car ownership, by type of car, November 2002
A fifth of consumers aged 55-64 bought a new car within the last two years
Figure 25: Car ownership, by type of car, socio-economic and demographic sub-group, November 2002
Some 15% of respondents claimed to have paid for their last car purchase mostly by HP or
PCP
Figure 26: Main method of payment for last car purchased, November 2002
Those aged 35-44 are most likely to pay for a car on credit
Figure 27: Main method of payment for last car purchased, by socio-economic and demographic sub-group, November 2002
ABC1 families and two full-time earner households also most likely to take out a loan or car finance agreement
Figure 28: Main method of payment for last car purchased, by Mintel's Special Groups, new
technology and ACORN categories, November 2002
A fifth of recent new car buyers paid for their car by HP, PCP or via a leasing agreement
Figure 29: Payment method, by type of car, November 2002
One in seven adults expect to purchase a car within the next two years
Figure 30: Proportion of respondents planning to buy a car within the next two years, by type of car, November 2002
Preferred source of finance for next car purchase
Figure 31: Prospective source of finance for next car purchase, by gender and by those who plan to buy a car within the next two years, November 2002
Profile of the car finance target market
Figure 32: Profile of the prospective target market for car finance, by socio-economic and
demographic sub-group, November 2002
Consumers look for low APRs on car finance products
Figure 33: Most important features of a car finance product, November 2002
ABs consider flexible payment options almost as important as fixed monthly repayments
Figure 34: Top six features, by age, gender, socio-economic group and region, November 2002
The Future
POS car finance needs to be made more attractive in comparison to other sources of credit
Changes to the Block Exemption will encourage greater cross-selling
A slight decline in demand for new cars anticipated
A cautionary note
Forecast
Uniquely favourable environment comes to an end
Figure 35: Forecast of the consumer car finance market - standard scenario, 2002-07
Back to reality
Used cars to regain lost ground
New car sales under more pressure
HP to do relatively well
Factors incorporated
Alternative scenarios
The positive outlook
Figure 36: Forecast of the consumer car finance market - positive scenario, 2002-07
The less promising outlook
Figure 37: Forecast of the consumer car finance market - positive scenario, 2002-07
Forecast methodology
Appendix: Research methodology
Index of reports
AbstractDrawing on a range of primary and secondary sources of information, this report provides a comprehensive overview of the point-of-sale car finance market in the UK. Manufacturers and dealers - often in partnership with third party finance companies - will offer attractive finance deals in order to stimulate demand for new, nearly-new and used cars. In this context, the main product types covered are hire-purchase, personal contract purchase and leasing. Such finance agreements are arranged through car retail outlets, namely franchised dealer showrooms, independent garages, car supermarkets and car auctions.
This report examines the size of the car finance market by sector and by the three main product categories, plus other point-of-sale loans. Since manufacturers and dealers promote credit options alongside car brands to encourage consumers to buy, it follows that a healthy demand for new and used cars will translate into a healthy demand for car finance, with average loan values being largely determined by average car prices. Hence the key factors that affect market growth, such as car sales, and impact on consumer confidence and spending, such as interest rates, are also considered. In addition, the report explores the impact of the Internet and recent legislative changes on the distribution of cars, which in turn have implications for car finance providers.
Although the focus of the report is on consumer finance arranged at the point of sale, car credit is also considered within the wider context of personal lending. The low interest rate environment, which has characterised the last few years and boosted spending levels, has made the loans market in general very competitive. The range of credit options available to the private motorist has expanded considerably, especially over the past five years. Banks and building societies such as the Alliance & Leicester, Halifax and NatWest, motoring organisations such as the AA and RAC, and other providers in the retail and finance sectors such as Direct Line, Marks & Spencer and Sainsbury's, are more actively targeting this sector by offering specially packaged car loans and related products such as payment protection and motor insurance. The report will therefore examine the impact of these direct lenders on the traditional point-of-sale car finance market.
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