But more than nine in 10 new cars are still acquired on finance.
The new car finance market fell noticeably in February as new car registrations continued to slide. And a leading finance association says the industry could suffer further over the coming months as the coronavirus pandemic takes its toll.
Figures from the Finance and Leasing Association (FLA) show 44,747 new cars acquired by private customers during February were financed by FLA members - a drop of eight percent on the same month in 2019. It’s a fall that far outstripped the 2.9-percent cut in new car registrations that was recorded by the Society of Motor Manufacturers and Traders (SMMT).
Nevertheless, the finance market still takes the lion’s share of new car registrations. According to the FLA, its members financed 91.8 percent of all private new car sales in the 12 months to February.
And the good news for financiers doesn’t stop there. Although there was a dramatic reduction in the number of new cars being financed by private buyers, the value of the advances offered on those vehicles did not fall quite as noticeably. The eight-percent reduction in volume equated to a four-percent drop in the value of advances, meaning lenders still shelled out a whopping £910 million.
For the used car market, meanwhile, the news was even better. There was modest growth in the number of used cars financed - up one percent to just over 125,500 - while the combined value of advances on those cars rocketed six percent.
However, the FLA’s chief economist and head of research, Geraldine Kilkelly, said the industry could face strong headwinds as the coronavirus hits. In fact, she called on the government and Bank of England to create “support schemes” for lenders who might be hit by non-payments caused by the economic implications of lockdown.
“The consumer car finance market made a quiet start to 2020 and faces significant disruption to new business over the coming months,” she said. “The economic impact of the coronavirus is expected to lead to a contraction in private consumption in the second quarter greater than reported in any quarter during the financial crisis.
“Motor finance is provided by a wide range of both bank and non-bank lenders who serve consumers and businesses across all sectors of the economy. The FLA is calling for urgent action by the government and Bank of England to open up financial support schemes to all lenders, including non-banks, so that they can continue to provide new lending and meet the huge demand for forbearance.”