The UK consumer car finance market grew by more than 40 percent year-on-year in January amid record increases in used car prices. According to figures from the Finance and Leasing Association (FLA), new business in the sector returned to just one percent below pre-pandemic levels in the first month of 2022.

Data from the organisation showed almost 54,000 new private cars were acquired on finance in January, up 47 percent compared with the same month in 2021. However, that figure is deceptive given car dealership doors were closed at the beginning of 2021, as the UK endured another coronavirus lockdown. Although click-and-collect services were permitted, the market was still impacted as customers were unable to browse showrooms.

But the value of the new car finance market grew even more dramatically, increasing by 52 percent compared with January 2021. In total, finance companies dished out just over £1.3 billion in advances on new private vehicles.

Men viewing car loan finance application on laptop

At the same time, the used car market also saw increases in new business and value, with the number of second-hand vehicles acquired on finance by private individuals topping 122,000. In terms of value, the advances handed out by finance companies totalled just short of £1.9 billion – an increase of 66 percent compared with January 2021. According to the FLA, that increase was driven by the rising value of used cars, which are becoming more expensive as the global chip shortage causes supply issues in the new car market.

According to Geraldine Kilkelly, the director of research and chief economist at the FLA, the latest figures showcase the strength of the used car market and the subdued market in January 2021. However, she said further growth was expected despite the Russian invasion of Ukraine.

“The strong performance of the consumer car finance market in January in part reflects the closure of showrooms during the third UK lockdown last year and the continued record-high growth in used car prices,” she said. “Annual new business by value reported by the consumer car finance market was only one percent lower in January than its pre-pandemic level.

"The economic outlook in the UK and globally has weakened following the invasion of Ukraine, with consumer price inflation in the UK expected to peak at more than 8% in the first half of this year. Nevertheless, we continue to expect further growth in the market during 2022 as demand for finance for electric vehicles and used cars remains strong.”