The consumer new car finance market took a hit in January as customer spending slowed, according to figures out this week. Data from the Finance and Leasing Association (FLA) reveals the number of new cars acquired on finance during the first month of 2023 was down by 10 percent compared with the same month last year.
In total, more than 48,000 new cars were acquired on finance by private customers, with lenders dishing out more than £1.22 billion in advances. Despite the enormous figures, the total value of advances offered in January was down by six percent compared with the corresponding month in 2022.
In the used car market, however, the picture was slightly different, with no overall change in the number of cars acquired on finance by private buyers. A total of 131,000 used cars were acquired that way, with lenders loaning consumers more than £1.9 billion – a drop of four percent compared with January 2022.
Overall, the consumer car finance market posted a modest drop in both volumes and advances, with almost 180,000 cars acquired on finance and more than £3.1 billion loaned out over the month. However, those figures represented reductions of three and five percent respectively when compared with the same month last year.
Geraldine Kilkelly, director of research and chief economist at the FLA, said the market was suffering at the hands of the cost-of-living crisis, which has seen consumers cut back on spending. However, she said the new car finance market was expected to grow in 2023, although the used car finance market’s value was expected to fall by 12 percent.
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“The consumer car finance market reported a modest fall in new business in January,” she said. “In the first half of 2023, household expenditure is likely to remain relatively weak as pressures on household incomes from high inflation, and higher interest rates and taxes continue, but we should see a further easing of supply shortages in the new car market as the year progresses.
“The FLA’s latest research suggests that the value of consumer car finance new business is likely to contract by six percent in 2023 to £38 billion. The value of new business provided to consumers for new car purchases is expected to grow by four percent in 2023 to £18 billion, while consumer used car finance new business by value is forecast to fall by 12 percent in 2023 to £21 billion. As always, customers who are worried about meeting payments should speak to their lender as soon as possible to find a solution.”