The consumer car finance market grew by nine percent last year, despite sluggish sales in the new car market. That’s according to figures from the Finance and Leasing Association (FLA), which said the industry’s recovery was “hampered” by the global chip shortage and economic uncertainty.

Data from the FLA shows a total of 2.1 million cars were financed by private customers through FLA members, up nine percent on 2020 but still down 14 percent compared with 2019. In monetary terms, FLA member organisations handed out advances worth more than £36.7 billion – an increase of two percent compared with 2020.

Despite figures from the Society of Motor Manufacturers and Traders (SMMT) showing 2021 new car sales were just one percent higher than in 2020, the consumer new car finance market saw new business rise by six percent. Again, however, the 737,000 new cars acquired on finance was still down by 21 percent compared with pre-pandemic 2019.

New cars in car dealership showroom

Nevertheless, 91.8 percent of private new car sales were financed by FLA members in 2021. In terms of value, meanwhile, the new car finance market was up by 13 percent compared with 2020, with the total value of advances topping £17.5 billion.

The used car finance sector was considerably larger, with more than 1.36 million used cars acquired on finance in 2021. That’s an increase of 10 percent compared with 2020, but nine percent lower than in 2020.

And the used car finance market was worth more, too, with FLA members handing out advances worth more than £19.2 billion in 2021. That’s a 19-percent increase in value compared with 2020.

Used car market stronger than ever as August sales beat previous records

Geraldine Kilkelly, the director of research and chief economist at the FLA, said the finance market would have recovered more obviously were it not for the new coronavirus variants undermining consumer confidence and the global semiconductor shortage, which has impacted vehicle supply.

“The consumer car finance market rebounded in 2021, but the pace of recovery was hampered by increased economic uncertainty as new waves and variants of Covid-19 emerged, and the global shortage of semiconductors hit vehicle supply,” she said.

“Economic and market conditions will remain challenging this year as many households face a significant squeeze on disposable incomes from higher inflation, interest rates and taxes. However, supply issues are expected to ease and business investment is expected to recover as the year progresses. The FLA’s first-quarter industry outlook survey for 2022 shows that 92 percent of motor finance providers expect new business growth over the next twelve months.”