UK Car Finance Market Report 2022

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The UK Car Finance market report identifies consumer attitudes towards purchasing vehicles with finance, the impact of the cost-of-living crisis and future innovations in the car finance market. This report covers the market size, market forecast, market segmentation and industry trends for the Car Finance market in the UK.

Current Market Landscape

The car finance market continues its recovery in 2022 after two years of considerable pandemic-driven disruption. The automotive industry faces continuing challenges due to the Ukraine conflict, raw material shortages and inflationary pressures. The macroeconomic environment’s impact on household finances cannot be ignored; consumers will be looking at ways to cut back on car spending and maximise value with their purchases.

Car Finance Market Share and Key Industry Trends

Car finance is most popular amongst younger consumers. However, this group is also more interested in alternatives to car ownership, including car subscription services and car clubs, due to growing concerns around the ability to remain financially resilient in times of economic pressure. This opens up broad possibilities for innovations in the car finance market, where brands will need to engage with younger drivers before they seek car ownership alternatives. This could be through product bundles, such as insurance or electric vehicle (EV) packages, flexible contracts, deferred payment options or vehicle return policies.

92% of new private care sales are purchased through new car finance plans.
29% of UK consumers would be interested in using a car subscription service in the future.
50% of consumers have changed their car use due to the COVID-19/coronavirus outbreak.
68% of driving license holders who drive a car think that the complexity of purchasing an electric car can be off-putting.

Future Trends in the Car Finance Market

Mintel car finance analysis shows that there are opportunities to improve understanding of Electronic Vehicle purchasing and to provide more support to customers through their Electronic Vehicle purchasing journey. Environmental pressures come to the forefront of the automotive industry as the UK moves closer to the 2030 deadline for ending the sale of new petrol and diesel vehicles meaning that more motorists look to purchase hybrid and electric vehicles. The car finance industry can harness this demand and include finance packages for electric cars.

Read on to discover more details or take a look at all of our UK Financial Services Market Research.

Understand Quickly

Market size and forecast for the car finance market.
Economic context and market drivers.
Competitive strategies, launch activity and advertising initiatives in the market.
Car purchasing intentions and intended use of car finance.
Popular car finance features and attitudes towards the market.

Covered in this Report

Product Types: Hire Purchases (HP), Personal Contract Purchase (PCP), Conditional Sales, Lease Purchase, Personal Contract Hire (PCH), Unsecure Personal Loan,

Brands: Volkswagen FS, Audi Finance, BMW FS, Ford Credit, Toyota FS, Mercedes-Benz Finance, Vauxhall Finance, Kia Finance, Hyundai Finance, PSA Finance, Black Horse Limited, Volvo FS, Santander Consumer, Honda FS, Suzuki FS, FCA Automotive Services, RCI FS.

Expert Analysis from a Specialist in the Field

This report, written by Natasha Hayes, a leading analyst in the Financial Services sector, delivers in-depth commentary and analysis to highlight current trends and add expert context to the numbers.

Despite experiencing a strong recovery from the pandemic in value terms in 2021, the car finance market faces a challenging 2022. Supply chain issues and inflationary pressures continue to disrupt the automotive sector and the rising cost of living is placing household finances under pressure. In this climate, providers will need to ensure customers can perceive value from their finance deal as well as extra reassurance in the form of additional flexibility over vehicle returns or payment holidays.”

Natasha Hayes
Financial Services Analyst

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Overview
- Key issues covered in this Report
- Market context
- Products covered in this Report
Executive Summary
- The five-year outlook for car finance
  - Figure 1: Category outlook, 2022-27
- The market
- Market size and forecast
  - Figure 2: Market forecast for car finance new contracts – Value, 2021-27
  - Figure 3: Market forecast for car finance new contracts – Volume, 2021-27
- Volume and value of car finance remains lower than 2019 for new cars
- 92% of new cars are bought using finance…
- …compared to 18% for used cars
- Macroeconomic environment brings challenges for the market
- Companies and brands
- Volkswagen is the UK’s leading car supplier in 2021
- Volvo subscription service represents 15% of new business
- Carmoola launches car finance app
- Chinese start-up NIO barrier for EVs
- The consumer
- 19% of drivers used car finance
  - Figure 4: Acquisition method of current car, 2022
- Majority of customers expect to keep car at end of arrangement
  - Figure 5: Behaviour at end of car finance contract, 2022
- Most consumers plan to buy outright over using finance
  - Figure 6: Intended purchase method for next car, 2022
- Rising cost of living will heighten existing focus on price
  - Figure 7: Car finance features when choosing a product, 2022
- Alternatives to ownership gain interest
  - Figure 8: Interest in alternatives to car ownership, 2022
- EV complexity creates opportunity for engagement
  - Figure 9: Consumer attitudes towards car finance, 2022
Issues and Insights
- Providers will need to demonstrate value as the rising cost of living bites
- Engage younger drivers before they seek alternatives to car ownership
- Car finance providers are well-placed to support EV buyers
Market Size and Performance
- Value of car finance grows 16%…
  - Figure 10: Volume and value of consumer car finance contracts sold at the point of sale, 2017-21
- …but volume remains 13% below 2019 figures
- Average advances continue to go up
  - Figure 11: Average advance for consumer car finance contracts sold at the point of sale, 2003-21
Market Forecast
- Car finance faces challenges in 2022
  - Figure 12: Category outlook, 2022-27
- Value of car finance arrangements forecast to reach £46 billion by 2027
  - Figure 13: Market forecast for consumer car finance contracts sold at the point of sale – Value, 2021-27
- - Figure 14: Market forecast for consumer car finance contracts sold at the point of sale – Value, 2021-27
- Slower recovery for the market in volume terms
  - Figure 15: Market forecast for consumer car finance contracts sold at the point of sale – Volume, 2021-27
- - Figure 16: Market forecast for consumer car finance contracts sold at the point of sale – Volume, 2021-27
- Learnings from the last income squeeze
  - Figure 17: Volume and value of consumer car finance contracts sold at the point of sale, 2007-14
- Forecast methodology
Market Segmentation
- Volume and value of new car finance contracts down on 2019…
  - Figure 18: Volume and value of consumer car finance contracts sold at the point of sale, by condition of car, 2017-21
- …whilst value of used car finance grew 5% on 2019
Car Finance Penetration
- 92% of new car sales are bought through finance
  - Figure 19: Proportion of new private car sales bought with a car finance agreement, 2013-21
- PCP most popular for new cars
  - Figure 20: Proportional distribution of consumer car finance contracts sold at the point of sale (new cars), by product type, 2020-21
- Car finance penetration much lower for used car market…
  - Figure 21: Proportion of used car sales bought with a car finance agreement, 2013-21
- …and HP plans are the most popular
  - Figure 22: Proportional distribution of consumer car finance contracts for used cars sold at the point sale, by product type, 2020-21
Channels to Market
- Dealerships are biggest channel for new and used car sales
  - Figure 23: Channel used to purchase used cars within the past two years, 2021
- Online channels yet to become mainstream
Economic Context
- Inflation is the key concern for 2022 for consumers, brands and the economy…
- …and consumer concerns are coming to the fore
  - Figure 24: Consumer concerns about household finances, 2021-22
- The conflict in Ukraine will hurt the UK economy…
- …and puts further pressure on the automotive industry
Market Drivers
- Hike in fuel prices as macroeconomic pressures hit
  - Figure 25: Weekly road fuel prices, by price per litre, 2020-22
- Used car sales recover better than new car registrations
  - Figure 26: Volume of new car registrations and used car sales, 2014-21
- Blurring of car finance and subscription models
- Subscription services create threats and opportunities for car finance
- The electric car market grows 76% in 2021…
- …however the cost of living pressures impact EV charging too
- EV infrastructure investment increases…
  - Figure 27: Number of publicly available electric vehicle charging devices at all speeds, 2019-22
- Price rises expected in car insurance market
- FCA launches new Consumer Duty
The Main Suppliers
- Volkswagen overtakes Ford as the new car market leader…
  - Figure 28: Share of new car registrations (private, business and fleet), by manufacturer, 2020-21
- …whilst Ford drops to fourth
- Ford Fiesta most popular used car model
  - Figure 29: Top ten models for used car sales, 2021
- Other brands play a key role in the market
Competitive Strategies
- RCI becomes Mobilize
- Providers offer discounts to ease cost-of-living pressures…
- …however inflationary pressures must be a focus of strategies
- Care by Volvo subscription represents 15% of Volvo’s new business
- Close Brothers partners with DocuSign for remote electronic signature solution
- Chinese start-up NIO demonstrates the potential of electric cars
Launch Activity
- Opportunities for further digital development
- Carmoola launches car finance app…
- …demonstrating a move towards finance-first car purchasing
- Rewards programme launched by Santander Consumer
- Moneyshake moves into the PCP market
Advertising and Marketing Activity
- Above-the-line advertising on car finance remains low…
  - Figure 30: Total above-the line, online display and direct mail advertising expenditure on car finance and unsecured personal loans, 2017/18-2021/22
- …but spread across multiple channels
  - Figure 31: Total above-the-line, online display and direct mail advertising expenditure on car finance, by media type, 2019/20-2021/22
- Adverse credit finance provider Autozone was biggest spender in 2021/22
  - Figure 32: Top ten advertisers of car finance products via above-the-line, online display and direct mail channels, 2017/18-2021/22
- Providers team up with sporting industry
- Wider car market spent £302 million in ATL advertising in 2020/21
  - Figure 33: Total above-the line, online display and direct mail advertising expenditure on cars, 2017/18-2021/22
- Nielsen Ad Intel coverage
Method of Acquiring Current Car
- A fifth of drivers used car finance to buy current car
  - Figure 34: Acquisition method of current car, 2022
- Purchasing methods change with lifestage…
  - Figure 35: Acquisition of current car, by generation, 2022
- …and level of savings
- - Figure 36: Acquisition of current car, by level of cash savings, 2022
- Finance is popular option for new car buyers
  - Figure 37: Acquisition of current car, by condition of car, 2022
Type of Car Finance Used
- PCP remains most common type of finance arrangement
  - Figure 38: Use of car finance products, by condition of car, 2022
- Majority of consumers expect to keep car at end of finance agreement
  - Figure 39: Behaviour at end of car finance contract, 2022
Car Purchasing Intentions and Methods
- Used petrol/diesel cars remain the most popular options
  - Figure 40: Types of cars consumers are planning to purchase in the next three years, 2022
- Consumers looking to buy a new car are more concerned by supply issues
- Consumers maintain a high preference for buying cars outright
  - Figure 41: Intended purchase method for next car, 2022
- New electric cars are popular choice for car financing
  - Figure 42: Intended car purchase method, by type of car consumers plan to purchase, 2022
Car Finance Features
- Interest rates are key for consumers when choosing a product
  - Figure 43: Car finance features when choosing a product, 2022
- Consumers demand flexibility in times of financial hardship
  - Figure 44: TURF Analysis – Car finance policy features, 2022
- Payment deferral more important for younger consumers
Attitudes towards Car Finance
- Alternatives to car ownership are popular amongst Gen Z
  - Figure 45: Interest in using a car subscription service in the future, by age, 2022
- - Figure 46: Attitudes towards being a member of a car club scheme, by age, 2022
- Consumers are confident when it comes to car finance
  - Figure 47: Consumer attitudes towards car finance, 2022
- Purchasing a car online is not appealing for most motorists
- EV manufacturers must simplify purchasing process
  - Figure 48: Attitude towards the complexity of purchasing an electric car, by those who intend to purchase a hybrid/electric car in the next three years, 2022
Appendix – Data Sources, Abbreviations and Supporting Information
- Abbreviations
- Consumer research methodology
- Other sources
- TURF Analysis Methodology
  - Figure 49: Table – TURF Analysis – Car finance, 2022
Appendix – Forecast Methodology
- Total market forecast
- Value of total car finance business
  - Figure 50: Market forecast for value of car finance new contracts, including lower and upper bounds, 2021-27
- Volume of total car finance business
  - Figure 51: Market forecast for volume of car finance new contracts, including lower and upper bounds, 2021-27
- Segment forecast: new
- Value of new car finance business
  - Figure 52: Market forecast for value of car finance new contracts for new cars, 2021-27
  - Figure 53: Market forecast for value of car finance new contracts for new cars, including lower and upper bounds, 2021-27
- Volume of new car finance business
  - Figure 54: Market forecast for volume of car finance new contracts for new cars, 2021-27
  - Figure 55: Market forecast for volume of car finance new contracts for new cars, including lower and upper bounds, 2021-27
- Segment forecast: used
- Value of used car finance business
  - Figure 56: Market forecast for value of car finance new contracts for used cars, 2021-27
  - Figure 57: Market forecast for value of car finance new contracts for used cars, including lower and upper bounds, 2021-27
- Volume of used car finance business
  - Figure 58: Market forecast for volume of car finance new contracts for used cars, 2021-27
  - Figure 59: Market forecast for volume of car finance new contracts for used cars, including lower and upper bounds, 2021-27
- Market drivers and assumptions
- Forecast methodology

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Current Market Landscape

Car Finance Market Share and Key Industry Trends

Future Trends in the Car Finance Market

Understand Quickly

Covered in this Report

Expert Analysis from a Specialist in the Field

Overview

Executive Summary

Issues and Insights

Market Size and Performance

Market Forecast

Market Segmentation

Car Finance Penetration

Channels to Market

Economic Context

Market Drivers

The Main Suppliers

Competitive Strategies

Launch Activity

Advertising and Marketing Activity

Method of Acquiring Current Car

Type of Car Finance Used

Car Purchasing Intentions and Methods

Car Finance Features

Attitudes towards Car Finance

Appendix – Data Sources, Abbreviations and Supporting Information

Appendix – Forecast Methodology

Why Choose Mintel?

Below is a generic PDF sample report. Understand what you are buying.

Is this report right for you?

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