UK consumer car-finance data highlights upward trend
17 January 2022
New car-finance data released by the Finance & Leasing Association (FLA) has highlighted further trends and performances in the UK. The data shows that new business volumes in this market were up 33% in November 2021, compared to a year ago. In the 11 months leading to November, this figure increased 9% year on year.
The FLA is one of the leading trade bodies for the asset, consumer, and motor-finance sectors in the UK, with members including manufacturers, banks, building societies, and retailers. It regularly provides industry statistics and updates.
Despite the upward trend, the latest figures indicate that the pace of recovery in the UK, as elsewhere in Europe, has been hampered by shortages, which is decimating supply. Bottlenecks are likely to persist into 2022 as countries across the world struggle with new waves of COVID-19. Meanwhile, carmakers continue to face challenges, with tougher trading arrangements, technology shifts and, most importantly, the ongoing semiconductor crisis.
Market recovery disrupted
The figures reveal that the consumer new car-finance market reported a 37% increase of new business by value, and 32% by volume in November year on year. In the 11 months running up to November, new-business volumes were 6% higher than in the same period in 2020. The FLA also found that the percentage of private new-car sales financed by FLA members in the 12 months to November was 92.3%.
‘The market’s recovery continues to be disrupted by supply-side shortages and the increasing squeeze on household disposable incomes from higher inflation and interest rates,’ said Geraldine Kilkelly, director of research and chief economist at the FLA. ‘New-business volumes in the consumer car finance market are likely to be just over 2.1 million cars in 2021 as a whole, 12% lower than at the onset of the pandemic in February 2020.’
The UK car-finance market was fast to recover as the economy opened up after various lockdowns, explaining the recent market developments. ‘The strong growth reported by the consumer car-finance market in November reflects low new-business volumes reported a year earlier as the UK entered another lockdown to deal with rising cases of COVID-19,’ added Kilkelly.
While new-car data showed growth, so did used-car figures. The consumer used-car finance market saw new business going up 55% by value, and 33% by volume in November year on year. Meanwhile, in the 11 months to November, new-business volumes in this market were 11% above the same period in 2020.
The data highlights the trend for businesses to turn to second-hand cars. Demand for used vehicles has helped restore the health of the automotive sector, which has been bruised by the pandemic. A shortage of new cars, caused by supply chain bottlenecks and the global chip deficit, have shifted consumer spending to used vehicles. It has also driven up prices. Prices for used cars rose by 29% in the UK – more than in any other European market.