Sorry for interrupting, this website uses cookies to improve your experience. We'll assume you're ok with this, but you can opt-out if you wish. Learn more
Accept & Close

Car Finance - UK - April 2014

“The key to sustaining an impressive level of growth in the car finance market in the years to come will be offering extras to overcome consumer reactions to interest rate rises, and finding a way to get a real foothold in the used car market.”

– Richard Shepherd, Research Analyst – Financial Services

Some questions answered in this report include:

  • Impressing and keeping new users is key to supporting recent growth
  • Despite its dominance, point-of-sale finance providers need to work to stay ahead
  • How to improve presence in the used car market?

During 2013, the point-of-sale car finance market posted strong growth. In value terms the market grew year on year, and in volume terms it increased by 18%. The car finance market is directly linked to conditions in both the wider consumer credit industry and the car sales market. Clearly, with fewer sales to fund, car finance providers’ performances will suffer in periods of weak car sales. Since 2012, the number of cars being sold has increased significantly, with the car finance market reaping the rewards of this with highly impressive growth in both volume and value in the last two years.

This report examines the car finance market, including discussion of recent changes in the industry. The size of the point-of-sale car finance market is analysed and a five-year forecast for the volume and value of new point-of-sale advances is provided. The sector’s major players are examined, along with notable product developments. Mintel’s specially commissioned consumer research provides insight into car finance ownership, where these plans were arranged, and how long ago consumers arranged their most recent car finance product. The types of research conducted prior to arranging a credit product are analysed, as well as attitudes towards car finance and car finance providers.

This report focuses mainly on point-of-sale car finance, which includes hire purchase (HP), personal contract purchase (PCP) and lease purchase plans. Because of the close competition between these products and other consumer credit providers, specialist car loans and personal loans are also discussed in parts of the report.

What you get

What's included

Why buy from us?

Succeed

Our reports will provide you with market data, consumer research and competitive intelligence to succeed in your market.

Instant Access

Buy now and you'll have instant access to the information you need to make the right decisions.

Opportunities

Find out what's next in the markets that matter to you: where opportunities lie and what challenges you will face.

Trusted

A business Superbrand, Mintel is a source you can trust. We have been defining and refining the Market Intelligence mix since 1972.

Table of contents

  1. Introduction

      • Report scope
        • Hire purchase
          • Personal contract purchase
            • Lease purchase
              • Abbreviations
              • Executive Summary

                  • The market
                    • Massive growth in value of car finance advances in the past two years
                      • Figure 1: Forecast of the value of point-of-sale car finance, by gross advances, fan chart, 2008-18
                    • Market factors
                      • Consumer confidence reaches a five-year high
                        • Figure 2: Consumer confidence barometer – UK, January 2009-February 2014
                      • Strong new car sales give car finance providers a large target market
                        • Figure 3: UK new car registrations 2009-13
                      • PPI compensation used to fund car purchases
                        • Providers prepare for FCA regulation
                          • Companies, products and innovations
                            • Ford credit, VFWS and GMAC are the car finance market leaders
                              • Little innovation, but a couple of new products
                                • The consumer
                                  • Car finance is the most commonly used form of credit for car purchases
                                    • Figure 4: Method of purchasing most recent car, February 2014
                                  • Half of all credit for car purchases is arranged at dealerships
                                    • Figure 5: Types of company used to arrange credit for most recent car purchase/lease, February 2014
                                  • Less than half of credit-funded car buyers actively researched their finance options
                                    • Figure 6: Car finance product research prior to purchase, February 2014
                                  • Nearly a third of consumers would not consider car finance, while a quarter are concerned about balloon payments
                                    • Figure 7: Attitudes towards car finance, February 2014
                                  • Freebies could persuade nearly a quarter to use car finance
                                    • Figure 8: Attitudes towards car finance providers, February 2014
                                  • What we think
                                  • Issues and Insights

                                      • Impressing and keeping new users is key to supporting recent growth
                                        • The facts
                                          • The implications
                                            • Despite its dominance, point-of-sale finance providers need to work to stay ahead
                                              • The facts
                                                • The implications
                                                  • How to improve presence in the used car market?
                                                    • The facts
                                                      • The implications
                                                      • Trend Application

                                                        • Borrow a lifestyle instead of buying a car?
                                                          • Offer experts to achieve success
                                                            • Older consumers have ignored car finance, but this can change
                                                            • Market Drivers

                                                              • Key points
                                                                • Improved confidence signals consumers’ return to the automotive market
                                                                  • Figure 9: UK consumer confidence barometer, January 2009-January 2014
                                                                • UK car population maintains steady rise…
                                                                  • Figure 10: Number of cars in use, 2008-12
                                                                • … but the age of cars on the road has increased
                                                                  • Figure 11: Comparison of age of cars on the road, by percentage of total, 2008 vs 2012
                                                                • Impressive growth in new car sales over the last 18 months…
                                                                  • Figure 12: UK new car registrations, 2009-13
                                                                • … assisted by record-low interest rates for finance
                                                                  • Figure 13: Monthly percentage values of selected interest rates. January 2009 – January 2014
                                                                • Compensation from mis-sold PPI has boosted car budgets
                                                                  • Figure 14: Monthly value of compensation paid to consumers for mis-sold PPI
                                                                • Consumer credit comes under FCA regulation
                                                                  • Regulator has also raised concerns about GAP insurance
                                                                  • Competitor Products

                                                                    • Key points
                                                                      • Car finance faces competition from many alternative funding methods
                                                                        • Figure 15: Method of purchasing most recent car, February 2014
                                                                      • Demand for consumer credit has increased…
                                                                        • Figure 16: Gross consumer credit lending, 2009-13
                                                                      • … and unsecured loans are most commonly used for car purchases
                                                                        • Figure 17: Reasons for taking out most recent loan product, by period of time most recent loan held for, November 2013
                                                                      • Only a minority of consumers can rely on savings to cover a car purchase
                                                                        • Figure 18: Value of saving and investments, November 2013
                                                                    • Market SWOT Analysis

                                                                        • Figure 19: Car finance market – SWOT analysis, 2014
                                                                    • Who’s Innovating?

                                                                      • Key points
                                                                        • Innovation in short supply
                                                                          • Peugeot’s Just Add Fuel lets drivers pay all car costs in one bill
                                                                            • New products have been heavily advertised
                                                                              • FLA helps to make car finance clearer
                                                                              • Market Size and Forecast

                                                                                • Key points
                                                                                  • Car finance has experienced major growth in volume and value
                                                                                    • Figure 20: Volume and value of point-of-sale car finance plans sold (private sector only) 2009-13
                                                                                  • Use of car finance for new car purchases has risen by more than a fifth in two years…
                                                                                    • Figure 21: Proportion of new private car sales bought with a car finance agreement, 2009-13
                                                                                  • … but there is still low penetration amongst used car sales
                                                                                    • Figure 22: Proportion of used car sales bought with a car finance agreement, 2009-13
                                                                                  • Car finance plans for new vehicles are driving the market
                                                                                    • Figure 23: Volume and value of private car finance plans sold, segmented by new and used cars, 2009-13
                                                                                  • Market forecast
                                                                                    • Volume of car finance sales expected to grow by a third in five years
                                                                                      • Figure 24: Forecast of volume of point-of-sale car finance plans, fan chart 2008-18
                                                                                      • Figure 25: Forecast of volume of point-of-sale car finance plans, 2008-18
                                                                                    • Car finance value expected to top £29bn in 2018
                                                                                      • Figure 26: Forecast of the value of point-of-sale car finance, by gross advances, fan chart, 2008-18
                                                                                      • Figure 27: Forecast of the value of point-of-sale car finance, by gross advances, at current and constant prices, 2008-18
                                                                                    • Forecast methodology
                                                                                      • Fan chart explanation
                                                                                      • Market Share

                                                                                        • Key points
                                                                                          • Most car finance is arranged at a dealership
                                                                                            • Figure 28: Types of company used to arrange credit for most recent car purchase/lease, February 2014
                                                                                          • Ford is the top-selling car manufacturer in the UK…
                                                                                            • Figure 29: Share of UK new car registrations, 2012-13
                                                                                          • … but VWFS have the most wide-reaching partnerships
                                                                                            • GMAC leads the specialist finance market
                                                                                            • Companies and Products

                                                                                              • Ford Credit
                                                                                                • GMAC Financial Services
                                                                                                  • Volkswagen Financial Services
                                                                                                    • Black Horse Motor Finance
                                                                                                      • Santander Consumer Finance
                                                                                                        • Personal loan providers
                                                                                                        • Methods of Funding Car Purchase

                                                                                                          • Key points
                                                                                                            • Car finance funds a fifth of car purchases…
                                                                                                                • Figure 30: Method of purchasing most recent car, February 2014
                                                                                                              • … but savings are the most common form of car funding
                                                                                                                • 25-34-year-olds are most likely to use car finance
                                                                                                                  • Figure 31: Ownership of car finance product by age group, February 2014
                                                                                                                • New cars are three times more likely to be bought on car finance than used cars
                                                                                                                  • Figure 32: Age of purchased car by method of purchasing most recent car, February 2014
                                                                                                              • Types of Finance Provider Used

                                                                                                                • Key points
                                                                                                                  • Car dealerships arrange more than half of all credit plans
                                                                                                                    • Figure 33: Types of company used to arrange credit for most recent car purchase/lease, February 2014
                                                                                                                  • HP plans are the most common dealership-based products; personal loans dominate at banks
                                                                                                                    • Figure 34: Type of company used to arrange credit for most recent car purchase/lease by product ownership, February 2014
                                                                                                                  • Banks lead dealers in financing used cars
                                                                                                                    • Figure 35: Type of company used to arrange credit for most recent car purchase/lease by age of car bought, February 2014
                                                                                                                • Car Finance Product Tenure

                                                                                                                  • Key points
                                                                                                                    • Almost 60% of car buyers using credit, did so in the last two years
                                                                                                                      • Figure 36: Time since most recent car was purchased/leased where a credit product was used, February 2014
                                                                                                                    • Young people were most likely to use car finance last year
                                                                                                                      • Figure 37: Percentage of car finance plans arranged in the last 12 months by age group, February 2013
                                                                                                                  • Car Finance Product Research

                                                                                                                    • Key points
                                                                                                                      • Less than half of car buyers researched credit options prior to purchase
                                                                                                                        • Figure 38: Car finance product research prior to purchase, February 2014
                                                                                                                      • Men are more likely to have researched credit options
                                                                                                                        • Figure 39: Percentage of consumers who researched credit options prior to car purchase/lease by gender, February 2014
                                                                                                                      • Car finance owners more likely than others to choose their car first…
                                                                                                                        • Figure 40: Car finance product research, by type of product used
                                                                                                                      • … while other credit holders are more likely to choose funding first
                                                                                                                      • General Attitudes Towards Car Finance

                                                                                                                        • Key points
                                                                                                                          • Consumers remain wary of credit
                                                                                                                            • Figure 41: Attitudes towards car finance, February 2014
                                                                                                                          • Low deposits and fixed payments are important for car finance users
                                                                                                                            • Figure 42: Attitudes towards car finance by certain methods of purchasing most recent car, February 2014
                                                                                                                          • More recent buyers are less concerned about balloon payments…
                                                                                                                            • Figure 43: Attitudes towards car finance by age of most recent finance product, February 2014
                                                                                                                          • … and are open to leasing, as long as they have control over how they use the car
                                                                                                                          • Attitudes Towards Car Finance Providers

                                                                                                                            • Key points
                                                                                                                              • Freebies make people more likely to take out car finance
                                                                                                                                • Figure 44: Attitudes towards car finance providers, February 2014
                                                                                                                              • High-income households are more interested in the product than the provider
                                                                                                                                • Figure 45: Percentage of consumers who said the terms of the product were more important than the type of provider, by annual household income, February 2014
                                                                                                                              • Younger car buyers are more likely to value car-buying advice
                                                                                                                                • Figure 46: Percentage of car owners/those who intend to buy a car who would be more likely to borrow from a bank if they could get car advice, by age group February 2014
                                                                                                                              • Car finance holders favour dealerships
                                                                                                                                • Figure 47: Attitudes towards car finance providers by certain product ownership, February 2014
                                                                                                                            • Appendix – Market Size and Forecast

                                                                                                                              • Volume
                                                                                                                                • Figure 48: Best- and worst-case forecast of the volume of car finance plans sold, 2013-18
                                                                                                                              • Value
                                                                                                                                • Figure 49: Best- and worst-case forecast of the value of car finance, by gross advances, 2013-18
                                                                                                                            • Appendix – Product Ownership

                                                                                                                                • Figure 50: Ownership of products used to fund the purchase of a car by demographics, February 2014
                                                                                                                                • Figure 51: Ownership of products used to fund the purchase of a car (continued) by demographics, February 2014
                                                                                                                                • Figure 52: Ownership of products used to fund the purchase of a car, (continued) by demographics, February 2014
                                                                                                                            • Appendix – Types of Finance Provider

                                                                                                                                • Figure 53: Types of finance provider by demographics, February 2014
                                                                                                                            • Appendix – Car Finance Product Tenure

                                                                                                                                • Figure 54: Age of most recent finance product by demographics, February 2014
                                                                                                                            • Appendix – Car Finance Product Research

                                                                                                                                • Figure 55: Car finance product research prior to purchase, by demographics, February 2014
                                                                                                                                • Figure 56: Car finance product research prior to purchase (continued), by demographics, February 2014
                                                                                                                            • Appendix – Attitudes Towards Car Finance

                                                                                                                                • Figure 57: Most popular attitudes towards car finance by demographics, February 2014
                                                                                                                                • Figure 58: Next most popular attitudes towards car finance by demographics, February 2014
                                                                                                                            • Appendix – Attitudes Towards Car Finance Providers

                                                                                                                                • Figure 59: Most popular attitudes towards car finance providers by demographics, February 2014
                                                                                                                                • Figure 60: Next most popular attitudes towards car finance providers by demographics, February 2014
                                                                                                                            • Appendix – Additional Research on PPI Compensation

                                                                                                                                • Figure 61: Total amount of compensation received by successful PPI mis-selling claimants, April 2014
                                                                                                                                • Figure 62: Most popular uses of PPI compensation, April2014

                                                                                                                            Companies Covered

                                                                                                                            • AB Volvo
                                                                                                                            • Ally Financial Inc.
                                                                                                                            • Audi United Kingdom
                                                                                                                            • Automobili Lamborghini Holding S.p.A.
                                                                                                                            • Bentley Motors Limited
                                                                                                                            • Black Horse Ltd
                                                                                                                            • Ford Motor Company Limited (UK)
                                                                                                                            • General Motors Corporation
                                                                                                                            • GMAC Financial Services (UK) Plc
                                                                                                                            • Grupo Santander UK
                                                                                                                            • Hyundai Car (UK) Ltd
                                                                                                                            • Kia Motors UK Ltd
                                                                                                                            • Lloyds Banking Group
                                                                                                                            • Mazda Motors UK Ltd
                                                                                                                            • Porsche Cars Great Britain Ltd
                                                                                                                            • PSA Peugeot Citroën S.A.
                                                                                                                            • SEAT SA
                                                                                                                            • Suzuki GB PLC
                                                                                                                            • Vauxhall Motors Ltd
                                                                                                                            • Volkswagen AG
                                                                                                                            • Volkswagen UK

                                                                                                                            Car Finance - UK - April 2014

                                                                                                                            £1,995.00 (Excl.Tax)