Countries covered: United Kingdom
Drawing 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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