But 93 percent of all private new car sales still involve some kind of finance deal.
The consumer car finance market fell by more than a third in January as lockdown continued to impact sales. According to figures from the Finance and Leasing Association (FLA), the number of private customers taking out finance agreements on cars fell by 35 percent during the first month of 2021.
Those figures come as no surprise, given figures released by the Society of Motor Manufacturers and Traders (SMMT) showed the new car market crumbled by almost 40 percent in January. The drop in demand was blamed on the coronavirus lockdown, which has forced dealers to close their showrooms to prospective customers for the duration of 2021 so far. However, click-and-collect-style sales are still permitted.
In January, financiers paid advances on more than 36,000 new cars, down 38 percent on the same period in 2020. And the value of those advances fell by 31 percent over the 12-month period, hitting £850 million. Yet despite that, the FLA says 93.2 percent of all new car sales involved a finance deal.
The used car finance market also suffered in lockdown, but it was significantly larger than the new car finance sector. Financiers shelled out for more than 87,500 used cars in January, with advances totalling more than £1.1 billion. Those figures were down 34 and 31 percent respectively when compared with January last year.
In total, the car finance market was worth £1.99 billion in January 2021 – a 31 percent drop compared with the same month last year. And almost 123,700 cars were financed, 35 percent fewer than in the first month of 2020.
Geraldine Kilkelly, the director of research and chief economist at the FLA, said the latest lockdown had made less impact on the market than the first lockdown last spring, and suggested the rest of the year would be more positive.
“The impact of the latest UK-wide lockdown restrictions has not been as severe as the first lockdown introduced last March, with many dealerships able to offer click-and-collect or delivery services,” she said. “The value of new business in the consumer car finance market is expected to fall by 16 percent in the first quarter of 2021 as a whole.
“Our latest research suggests that once showrooms reopen there will be a strong recovery in the consumer car finance market, with the value of new business expected to grow by 17 percent in 2021, and a further 12 percent growth forecast for 2022.”