The UK consumer car finance market slumped in August as the global chip shortage continued to take its toll on new car sales. Figures from the Finance and Leasing Association (FLA) showed the UK’s finance companies financed around 160,000 cars in August – down 10 percent compared with the same month last year.
Chief among the reasons for this slump was the global semiconductor shortage, which has seen the new car market suffer considerably. Data from the Society of Motor Manufacturers and Traders (SMMT) showed new car registrations were down by 22 percent in August as car makers struggled to build vehicles.
As a result, the consumer new car finance market also suffered. Private customers financed just over 40,000 new cars in August, down 18 percent compared with the same month in 2020. Accordingly, the value of advances offered on new cars was also down, albeit not as dramatically.
According to the FLA, the value of advances on new private cars stood at £906 million in August. That was down by 13 percent compared with the same month last year.
The used car finance market has not been hit so hard, with demand inflated partly as a result of the new car market’s supply issues. As a result, almost 120,000 used cars were financed by private consumers in August, down just seven percent on the same month last year.
And with values increasing amid the increased demand, the value of advances on those cars remained identical to the year before, despite the dip in vehicle numbers. In total, the advances were worth almost £1.7 billion.
With that, the overall car finance market slumped by 10 percent in terms of volume, but the value of advances fell less dramatically. In August, the consumer car finance sector shelled out a total of more than £2.5 billion in advances, financing 159,509 private customers’ vehicles.
Geraldine Kilkelly, the director of research and chief economist at the FLA, said the new car market’s struggles were mitigated by the relative strength of the new car market.
“Supply issues in the new car market caused by the shortage of semiconductors continue to hamper the recovery of the automotive industry following the pandemic,” she said. “New business volumes in the consumer new car finance market fell for a second consecutive month in August and the near-term outlook is likely to be weaker than previously expected.
“By contrast, the consumer used car finance market remains relatively strong, with annual new business by value in August only one percent below its pre-pandemic peak.”