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UK Car Finance: Inc Impact of COVID-19 market report

Everything you need to make the right decisions

Providing the most comprehensive and up-to-date information and analysis of the Car Finance: : Inc Impact of COVID-19 - UK market, and the behaviours, statistics, preferences and habits of the consumer.

Mintel has the answers you’re looking for

What are the key challenges facing the industry? Who is the consumer and what do they want? Where are the opportunities, where are the risks and what lies ahead?

Covered in this report

COVID-19 poses an immense challenge to the car finance market in 2020. Lockdown closed all car dealerships for at least 10 weeks, cutting off the primary channel for car finance sales. Activity will be severely restricted while social distancing rules (even reduced ones) remain in place. Additionally, the economic downturn resulting from the outbreak will affect consumers’ ability to afford to upgrade/replace their cars or get new ones. Even people who have not seen disruption to their income will be cautious about making big purchases in times of high uncertainty.

All reports purchased from the Mintel Store now come with free access to our COVID-19 Global Insights Hub, allowing you to understand how industries and consumer behaviour is changing worldwide.


What does the COVID-19 Global Insights Hub give you access to?

  • Over 450 pieces of research (with more published each week) addressing markets across the globe.
  • Discover how people in countries at different stages of the crisis are adjusting to the 'new normal'.
  • Trending industries which have seen growth due to the changes in circumstance.
  • Our latest consumer research surveys, allowing you to see customers views right now.

Expert analysis from a specialist in the field

Written by Irene Salazar, a leading analyst in the Finance sector, her extensive knowledge delivers in-depth commentary and analysis to highlight current trends and add expert context to the numbers.

The car finance sector has experienced challenges for the last few years, but previous difficulties pale in comparison to the threat posed by COVID-19 in the short and medium term. The crisis will affect consumers and businesses for years to come, accelerating structural changes in terms of sustainability and profitability. The shift towards online channels is more obvious and urgent and some providers risk being left behind. Irene Salazar
Senior Finance Analyst

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What's included

What's included

Table of contents

Table of contents

  1. Overview

    • What you need to know
      • Key issues covered in this Report
        • Products covered in this Report
        • Executive Summary

            • The Market
              • Value of car finance contracts grew by 3% in 2019…
                • Figure 1: Volume and value of new consumer POS car finance contracts, 2015-19
              • …but COVID-19 deals a heavy blow to a struggling market
                • Figure 2: Forecast of value of new consumer POS car finance contracts, 2015-25
              • Used car sales drive the market
                • 2019 proved to be a better year than 2018 and 2017 for car sales
                  • Emergency measures amid long-term changes
                    • Legislative changes will increase demand for green vehicles
                      • Impact of COVID-19 on car finance
                        • Figure 3: Expected impact of COVID-19 on car finance, short, medium and long term, 9 June 2020
                      • Short term
                        • Medium term
                          • Long term
                            • Companies and Brands
                              • Premium brands increasingly popular in the new car market
                                • In-house finance divisions are the norm among large manufacturers
                                  • Providers strive to attract buyers
                                    • Online channels gain importance
                                      • Buy-now-pay-later solutions explored
                                        • Barclays Partner Finance withdraws from the car finance market
                                          • The consumer
                                            • 84% of adults have a driving licence
                                              • 28% used loans or car finance to purchase their car
                                                • Figure 4: How paid for car, 2019 and 2020
                                              • 43% plan to buy a new car in the next 12 months, down from 50% in 2019
                                                • Figure 5: Plans to buy or lease a car within the coming year, 2019 and 2020
                                              • Prospective funding methods largely unchanged since 2019
                                                • Figure 6: Expected method of funding acquisition of car, by condition of car planning to get, 2019 and 2020
                                              • People with experience of car finance likely to use it again
                                                • Figure 7: Proportion who have previously used finance type, by drivers who used a loan or finance/leasing agreement to obtain current car, May 2020
                                              • Manufacturer dealerships are the most trusted type of provider
                                                • Figure 8: Trust in providers of car finance, May 2020
                                              • Consumers set to be increasingly price-sensitive
                                                • Figure 9: Most important features when choosing car finance, May 2020
                                              • What we think
                                              • The Impact of COVID-19 on Car Finance

                                                • Short, medium and long-term impact on the industry
                                                  • Figure 10: Expected impact of COVID-19 on car finance, short, medium and long term, 9 June 2020
                                                • Short term
                                                  • Medium term
                                                    • Long term
                                                      • Opportunities and Threats
                                                        • Lockdown and social distancing restrictions cause extreme disruption to the market
                                                          • Recession will result in falling car sales
                                                            • Online channels can cut costs and extend the reach of providers
                                                              • Competition and low margins likely to result in market withdrawals
                                                                • Consumers will be price-driven but will also seek flexibility
                                                                  • Support, sustainability and responsible lending are key
                                                                    • Impact on the market
                                                                      • Sales will plummet in 2020, but recovery is expected from 2021
                                                                        • Figure 11: Forecast of the consumer POS car finance market, by volume and value, 2020-25
                                                                      • Even prior to COVID-19 growth was expected to be modest
                                                                        • Figure 12: Forecast of volume of new consumer POS car finance contracts, 2015-25
                                                                        • Figure 13: Forecast of value of new consumer POS car finance contracts, 2015-25
                                                                      • Government and industry-wide intervention is likely
                                                                        • Payment holidays and extensions can result in cashflow challenges…
                                                                          • …and unsustainable debt
                                                                            • Shifts in consumer behaviour
                                                                              • Significant numbers of households have seen their finances affected
                                                                                • Figure 14: Impact of COVID-19 on household finances, 21-28 May 2020
                                                                              • 30% have put off making major purchases
                                                                                • Figure 15: Impact of COVID-19 on consumers’ plans, by age, 21st- 28th May 2020
                                                                              • Confidence will take time to recover
                                                                                • Figure 16: The financial confidence index, January 2015-May 2020
                                                                              • Lockdown and social distancing will change consumer perceptions
                                                                                • Figure 17: Impact of COVID-19 on consumer behaviours, February-April 2020
                                                                              • Impact on key consumer segments
                                                                                • Higher-income households are worried, but some will receive a financial boost
                                                                                  • Parents are more likely to see the need for a car
                                                                                    • Attracting new and young drivers presents opportunities and challenges
                                                                                      • People who need cars for work are key in the short and mid-term
                                                                                        • How a COVID-19 recession will reshape the market
                                                                                          • Rising unemployment will hit confidence and long-term lending
                                                                                            • What can we learn from previous slowdowns?
                                                                                              • A different type of recession for consumer credit
                                                                                                • COVID-19: Market context
                                                                                                • Issues and Insights

                                                                                                  • Fierce competition is expected in the short term…
                                                                                                    • The facts
                                                                                                      • The implications
                                                                                                        • …but a long-term move towards sustainability and profitability is key
                                                                                                          • The facts
                                                                                                            • The implications
                                                                                                            • The Market – What You Need to Know

                                                                                                              • COVID-19 deals a heavy blow to a struggling market
                                                                                                                • Used car sales drive the market
                                                                                                                  • 2019 proved to be a better year than 2018 and 2017 for car sales
                                                                                                                    • Emergency measures amid long-term changes
                                                                                                                      • Legislative changes will increase demand for green vehicles
                                                                                                                      • Market Size and Forecast

                                                                                                                        • Value of car finance contracts grew by 3% in 2019…
                                                                                                                          • Figure 18: Volume and value of new consumer POS car finance contracts, 2015-19
                                                                                                                        • …but COVID-19 has dealt a heavy blow
                                                                                                                          • Outlook: Sales will plummet in 2020…
                                                                                                                              • Figure 19: Forecast of the consumer POS car finance market, by volume and value, 2020-25
                                                                                                                            • …but a bounce-back is expected from 2021
                                                                                                                              • Figure 20: Forecast of volume of new consumer POS car finance contracts, 2015-25
                                                                                                                              • Figure 21: Forecast of value of new consumer POS car finance contracts, 2015-25
                                                                                                                          • Market Segmentation

                                                                                                                            • Used car sales drive the market
                                                                                                                              • Figure 22: Volume and value of consumer POS car finance contracts, by new and used cars, 2015-19
                                                                                                                            • Vast majority of new private sales were funded by dealer finance in 2019
                                                                                                                              • Figure 23: Proportion of new private car sales bought with a POS finance agreement, 2015-19
                                                                                                                            • Used car sales increasingly funded by POS finance
                                                                                                                              • Figure 24: Proportion of used car sales bought with a car finance agreement, 2015-19
                                                                                                                          • Market Drivers

                                                                                                                            • 2019 proved to be a better year than 2018 and 2017 for car sales…
                                                                                                                              • Figure 25: Volume of new car registrations and used car sales via dealers, 2015-19
                                                                                                                            • …but 2020 expected to be worst year in decades
                                                                                                                              • Proportion of private registrations remains unchanged
                                                                                                                                • Figure 26: Number of new car registrations, by type of customer, 2015-19
                                                                                                                              • Car parc grew by 1.2% in 2019…
                                                                                                                                • …with electric vehicles showing strong growth
                                                                                                                                  • Figure 27: Number of licensed cars in the UK, by fuel type, 2014-19
                                                                                                                                • Cost of car ownership continues to increase…
                                                                                                                                  • …which encourages hiring and sharing schemes
                                                                                                                                    • Competition and innovation stemming from unsecured loans market…
                                                                                                                                      • …but demand for new consumer credit falls as cautious consumers repay debt
                                                                                                                                      • The Regulatory Environment

                                                                                                                                        • COVID-19: FCA introduces temporary relief measures
                                                                                                                                          • FCA announces plans to tackle commission concerns
                                                                                                                                            • Legislative changes will increase demand for green vehicles
                                                                                                                                              • Changes in the way UK Road Tax (VED) is calculated
                                                                                                                                                • New restrictions on petrol and diesel cars announced
                                                                                                                                                  • London congestion charges and passenger fares to help cover TfL bailout
                                                                                                                                                  • Companies and Brands – What You Need to Know

                                                                                                                                                    • Premium brands increasingly popular in the new car market
                                                                                                                                                      • In-house finance divisions are the norm among large manufacturers
                                                                                                                                                        • Providers strive to attract buyers
                                                                                                                                                          • Online channels gain importance
                                                                                                                                                            • Buy-now-pay-later solutions explored
                                                                                                                                                              • Barclays Partner Finance withdraws from the car finance market
                                                                                                                                                              • The Main Suppliers

                                                                                                                                                                • Premium brands increasingly popular in the new car market
                                                                                                                                                                  • Figure 28: Share of new car registrations, by manufacturer, 2018 and 2019
                                                                                                                                                                • In-house finance divisions are the norm among large manufacturers
                                                                                                                                                                • Competitive Strategies

                                                                                                                                                                  • Providers strive to attract buyers
                                                                                                                                                                    • Online channels gain importance
                                                                                                                                                                      • Buy-now-pay-later solutions explored…
                                                                                                                                                                        • …even before COVID-19
                                                                                                                                                                          • Barclays Partner Finance withdraws from the car finance market
                                                                                                                                                                            • Santander Finance partners with MG Motor UK
                                                                                                                                                                              • Mazda introduces scrappage incentive
                                                                                                                                                                                • Closure of dealerships likely to continue
                                                                                                                                                                                  • Moneybarn fined for ‘unsustainable’ repayment plans and practices
                                                                                                                                                                                  • Advertising and Marketing Activity

                                                                                                                                                                                    • Pre-COVID-19 above-the-line adspend on car finance products falls
                                                                                                                                                                                      • Figure 29: Total above-the-line, online display and direct mail advertising expenditure on car finance products, 2015/16-2019/20
                                                                                                                                                                                    • Digital advertising is the dominant channel
                                                                                                                                                                                      • Figure 30: Total above-the-line, online display and direct mail advertising expenditure on car finance products, by media type, 2019/20
                                                                                                                                                                                    • Top 10 advertisers account for 72% of adspend
                                                                                                                                                                                      • Figure 31: Top 10 advertisers of above-the-line, online display and direct mail advertising expenditure on car finance products, 2019/20
                                                                                                                                                                                    • Nielsen Ad Intel coverage
                                                                                                                                                                                    • The Consumer – What You Need to Know

                                                                                                                                                                                      • 14% of licence holders don’t currently drive a vehicle
                                                                                                                                                                                        • 28% used loans or car finance to purchase their car
                                                                                                                                                                                          • 43% planning a new car in next 12 months, down from 50% in 2019
                                                                                                                                                                                            • People with experience of car finance likely to use it again
                                                                                                                                                                                              • Manufacturer dealerships are the most trusted type of provider
                                                                                                                                                                                                • Consumers set to be increasingly price-sensitive
                                                                                                                                                                                                • Licence Holders and Car Ownership

                                                                                                                                                                                                  • 84% of adults have a driving licence
                                                                                                                                                                                                    • Figure 32: Driving licence ownership, May 2020
                                                                                                                                                                                                  • 14% of licence holders don’t currently drive a vehicle
                                                                                                                                                                                                    • Figure 33: Type of vehicle driven, May 2020
                                                                                                                                                                                                  • Majority of drivers are key decision-makers
                                                                                                                                                                                                    • Figure 34: Registered keeper of car driven, May 2020
                                                                                                                                                                                                  • Nearly two fifths of cars acquired less than two years ago
                                                                                                                                                                                                    • Figure 35: Length of time ago acquired car, May 2020
                                                                                                                                                                                                • Funding Method at Last Arrangement/Purchase

                                                                                                                                                                                                  • 28% of drivers used loans or car finance to purchase their car
                                                                                                                                                                                                    • Figure 36: How paid for car, 2019 and 2020
                                                                                                                                                                                                  • Part-exchange of an older vehicle could help drive sales of new cars
                                                                                                                                                                                                    • Figure 37: How paid for car, by condition and length of time ago acquired it, May 2020
                                                                                                                                                                                                • Car Buying Plans and Expected Method of Finance

                                                                                                                                                                                                  • 43% of licence holders are planning to buy/lease a car within the next year…
                                                                                                                                                                                                    • Figure 38: Plans to buy or lease a car within the coming year, May 2020
                                                                                                                                                                                                  • …significantly less than in 2019
                                                                                                                                                                                                    • Figure 39: Plans to buy or lease a car within the coming year, 2019 and 2020
                                                                                                                                                                                                  • Prospective funding methods largely unchanged since 2019
                                                                                                                                                                                                    • Figure 40: Expected method of funding acquisition of car, by condition of car planning to get, 2019 and 2020
                                                                                                                                                                                                  • 28% of potential buyers plan to use a loan, car finance or lease agreement
                                                                                                                                                                                                    • Figure 41: Expected method of funding acquisition of car, by condition of car planning to get, May 2020
                                                                                                                                                                                                • Use of and Interest in Car Finance

                                                                                                                                                                                                  • 55% have used some form of car finance
                                                                                                                                                                                                    • Figure 42: Use of car finance, May 2020
                                                                                                                                                                                                  • Consumers point to HP and personal loans as most widely used products
                                                                                                                                                                                                    • People with experience of car finance likely to use it again
                                                                                                                                                                                                      • Figure 43: Proportion who have previously used finance type, by drivers who used a loan or finance/leasing agreement to obtain current car, May 2020
                                                                                                                                                                                                  • Trust in Providers of Car Finance

                                                                                                                                                                                                    • Manufacturer dealerships are the most trusted type of provider
                                                                                                                                                                                                      • Figure 44: Trust in providers of car finance, May 2020
                                                                                                                                                                                                    • Current bank has privileged access to customers
                                                                                                                                                                                                      • A time for innovative partnerships
                                                                                                                                                                                                      • Interest in Car Finance Features

                                                                                                                                                                                                        • Consumers to be extremely price-driven
                                                                                                                                                                                                          • Opportunity for providers to customise deals
                                                                                                                                                                                                            • Transparency is key, especially post-COVID-19
                                                                                                                                                                                                              • Figure 45: Most important features when choosing car finance, May 2020
                                                                                                                                                                                                            • TURF analysis: a combination of flexible features can appeal to 91% of potential customers
                                                                                                                                                                                                              • Figure 46: Interest in car finance features, TURF Analysis, May 2020
                                                                                                                                                                                                          • Appendix – Data Sources, Abbreviations and Supporting Information

                                                                                                                                                                                                              • Abbreviations
                                                                                                                                                                                                                • Consumer research methodology
                                                                                                                                                                                                                  • TURF analysis methodology
                                                                                                                                                                                                                    • Figure 47: Interest in car finance features – TURF analysis table output, May 2020

                                                                                                                                                                                                                About the report

                                                                                                                                                                                                                This report will give you a complete 360-degree view of your market. Not only is it rooted in robust proprietary and high-quality third-party data, but our industry experts put that data into context and you’ll quickly understand:

                                                                                                                                                                                                                • The Consumer

                                                                                                                                                                                                                  What They Want. Why They Want It.

                                                                                                                                                                                                                • The Competitors

                                                                                                                                                                                                                  Who’s Winning. How To Stay Ahead.

                                                                                                                                                                                                                • The Market

                                                                                                                                                                                                                  Size, Segments, Shares And Forecasts: How It All Adds Up.

                                                                                                                                                                                                                • The Innovations

                                                                                                                                                                                                                  New Ideas. New Products. New Potential.

                                                                                                                                                                                                                • The Opportunities

                                                                                                                                                                                                                  Where The White Space Is. How To Make It Yours.

                                                                                                                                                                                                                • The Trends

                                                                                                                                                                                                                  What’s Shaping Demand – Today And Tomorrow.

                                                                                                                                                                                                                Please Note: This is a sample report. All of the figures, graphs, and tables have been redacted.

                                                                                                                                                                                                                Description