Table of Contents
Executive Summary
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- Impact of COVID-19 on the car finance market
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- Figure 1: Short-, medium- and long-term impact of COVID-19 on the consumer car finance market, 1 June 2021
- The market
- Market size and forecast
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- Figure 2: Forecast of the consumer point-of-sale car finance market, by total number of new contracts, 2016-26
- New car registrations down by 29% in 2020…
- …although green cars bucked this trend
- Over 90% of new cars are sold via dealer finance
- Penetration is much lower in the used car market, but growing
- Discretionary commission banned
- Companies and brands
- Volkswagen, Ford and Vauxhall Finance are the largest captives…
- …while Santander and Black Horse are the leading third-party specialists
- Payment holidays prove popular with car finance customers
- Business shifts online…
- …and is set for future growth
- The consumer
- Impact of COVID-19 on driving habits
- Good prospects for both virgin and repeat business
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- Figure 3: Usage and consideration of the main types of car finance, April 2021
- Finance enables people to replace their cars more frequently
- Car buyers use a mix of channels: in-person, online and virtual
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- Figure 4: Agreement with statements about arranging finance, in order of significance, April 2021
- 11% of car finance customers have taken a payment holiday in the past year
- 7 million are planning to purchase a car in the next 12 months…
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- Figure 5: When planning to get (next) car, April 2021
- …of which, around 3 million are intending to buy green
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- Figure 6: Type of car expected to get, by when planning to get next car, April 2021
- Flexible terms and shorter contract periods would prompt more to consider car finance
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- Figure 7: Agreement with statements about car ownership and finance, by those who used a finance/lease agreement to obtain current car versus those who bought outright or with a loan, April 2021
Issues and Insights
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- Changing driving habits, as a result of COVID-19 and the green agenda, will benefit the car finance market
- Digital channels will become ever more important and influential
The Market – Key Takeaways
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- Recovery will gather pace towards the end of 2021 and into 2022
- COVID-19 has wreaked havoc on the UK car market
- Lockdown restrictions boost Click and Collect sales
- Car subscription represents a small potential threat
- Ban on discretionary commission comes into effect
Market Size and Forecast
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- Demand for car finance falls as pandemic prompts slump in car sales
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- Figure 8: Short-, medium- and long-term impact of COVID-19 on the consumer car finance market, 1 June 2021
- Number of consumer car finance contracts down by a fifth in 2020
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- Figure 9: Volume and value of consumer car finance contracts sold at the point of sale, 2016-20
- Outlook: market will rebound over the next two years
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- Figure 10: Forecast of the consumer point-of-sale car finance market, by volume and value, 2021-26
- Figure 11: Volume of consumer car finance contracts sold at the point of sale, 2016-26
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- Figure 12: Value of consumer car finance contracts sold at the point of sale, at current prices, 2016-26
- Market drivers and assumptions
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- Figure 13: Key drivers affecting Mintel’s market forecast (prepared on 1 June 2021), 2016-25
- Conditions are very different from the last recession
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- Figure 14: Volume and value of consumer car finance contracts sold at the point of sale, 2007-12
- Forecast methodology
Market Segmentation
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- New car sector hit hardest by pandemic
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- Figure 15: Volume and value of consumer car finance contracts sold at the point of sale, by condition of car, 2016-20
- Used car sector continues to account for a growing share of new business
- Vehicle prices rise, despite COVID-related pressure, pushing up average advances
- Over 90% of new private car sales are funded by dealer finance…
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- Figure 16: Proportion of new private car sales bought with a finance agreement at the point of sale, 2016-20
- …versus just 18% of used car sales
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- Figure 17: Proportion of used car sales bought with a car finance agreement at the point of sale, 2016-20
- PCPs remain the preferred choice for new car buyers
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- Figure 18: Proportional distribution of consumer car finance contracts sold at the point of sale, by product type, 2020
- Why PCPs are popular
- Unsecured loans represent a very small part of the dealer product mix
Channels to Market
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- Franchised dealers distribute the lion’s share of new car finance…
- …and a significant proportion of used car finance sales
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- Figure 19: Channel used to purchase last car by those who have bought a used car within the past two years, November 2018 and November 2020
- Online channels heavily utilised in early stages of buying process…
- …and for researching finance options
Market Drivers
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- An immensely difficult trading environment…
- …but there are some positives: vaccine roll-out and the EU trade deal
- Click and Collect is here to stay
- A high savings ratio and low interest rates will help drive the recovery
- New and used car sales have fallen
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- Figure 20: Volume of new car registrations and used car sales via dealers, 2016-20
- Private sales account for a falling proportion of total new registrations
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- Figure 21: Number of new car registrations, by type of customer, 2016-20
- Around one in five cars on the road are financed
- Electric cars accounted for nearly one in six new car registrations in 2020
- Alternatives to car ownership see growth
- Ban on discretionary commission comes into effect
Companies and Brands – Key Takeaways
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- Supply end of the market offers little scope for newcomers to make significant inroads…
- …unlike the distribution side, which is more crowded
- Payment holidays prove popular with car finance customers
- Digitising the car-buying journey boosts online sales of car finance…
- …and offers the greatest opportunity for future growth
The Main Suppliers
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- Most of the largest manufacturers are served by ‘captive’ operations
- Ford and Volkswagen are the most popular car marques in the UK
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- Figure 22: Share of new car registrations (private, business and fleet), by manufacturer, 2019 and 2020
- Volkswagen Financial Services maintains its market leader position
- Ford Credit’s UK portfolio declined by nearly a fifth in 2020
- Banque PSA Finance increases penetration rate
- Other large captives
- Just two big-name specialists remain
- Santander Consumer UK
- LBG and Black Horse
- Significant others
Competitive Strategies and Innovation
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- Car finance is becoming increasingly digitised
- COVID-19 has accelerated this shift
- FCE Bank restructures and launches digital channel
- Banque PSA Finance continues to digitally transform its processes
- Santander Consumer establishes new joint venture with Volvo
- V12 Vehicle launches new prime HP product
- Alphabet launches new PCH platform
- Manufacturers offer interest-free payment holidays to woo new car buyers during pandemic
Advertising and Marketing Activity
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- Car finance attracts a small amount of above-the-line adspend…
- …which was down 7% in 2020
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- Figure 23: Total above-the-line, online display and direct mail advertising expenditure on car finance and unsecured personal loans, 2016-20
- Zuto accounted for more than 70% of total adspend in 2020
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- Figure 24: Top six advertisers of car finance products via above-the-line, online display and direct mail channels, 2018-20
- Digital advertising accounted for 84% of total adspend
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- Figure 25: Share of above-the-line, online display and direct mail advertising expenditure on car finance, by media type, 2018
- Nielsen Ad Intel coverage
The Consumer – Key Takeaways
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- The pandemic has altered driving habits but people’s commitment to the car is as strong as ever
- Good prospects for both virgin and repeat business
- Point-of-sale finance will face increased pressure from online channels
- 7 million are planning to purchase a car in the next 12 months
- Flexible terms and shorter contract periods would prompt more to consider car finance
Impact of COVID-19 on Consumer Behaviour
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- 42% of drivers have been using their car more often during the pandemic
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- Figure 26: Type of transport used more often during pandemic, by drivers and non-drivers, April 2021
- Frequency of car usage set to return to normal post-pandemic
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- Figure 27: Frequency of using a car/other private motor vehicle before pandemic and expected frequency afterwards, April 2021
- Pre-pandemic, over 80% of drivers used their car for frequent ‘essential’ trips
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- Figure 28: Reason for using a car/other private motor vehicle before the pandemic, April 2021
- Many consumers will remain wary of using public transport
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- Figure 29: Agreement with statements about using public and private modes of transport, April 2021
- Most people think cars will remain the most convenient form of travel
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- Figure 30: Agreement with statement about cars being the most convenient mode of transport, April 2021
Usage and Consideration of Car Finance
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- There is a large target audience for car finance…
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- Figure 31: Proportion of adults aged 17+ with a driving licence, by gender and age, April 2021
- …with 35 million car drivers
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- Figure 32: Type of vehicle currently driven by licence holders, April 2021
- HP is the most commonly used type of car finance
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- Figure 33: Usage and consideration of the main types of car finance by drivers with a full licence, April 2021
- Good prospects for repeat business
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- Figure 34: Usage and consideration of the main types of car finance (netted responses), April 2021
- 64% of drivers would consider using car finance
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- Figure 35: Usage and consideration of the main types of car finance (netted responses), April 2021
How and When Obtained Current Car
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- 4% of drivers are leasing their car
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- Figure 36: How acquired current car, April 2021
- Couples with a household income of £50K-£75K have a strong propensity to buy a car on finance
- 42% have had their car for less than three years
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- Figure 37: Length of time had car (drivers who bought or lease their car only), April 2021
- 45% acquired a new car
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- Figure 38: Length of time had car and condition when acquired, April 2021
- Used car finance faces greater competition from personal loans
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- Figure 39: How acquired current car, by length of time had it and condition when acquired, April 2021
Pre-purchase Behaviour
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- Majority research online prior to purchasing a new car
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- Figure 40: Agreement with statements about arranging finance, in order of significance, April 2021
- Price comparison sites play a key role in personal loan sector of the market
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- Figure 41: Agreement with statements about arranging finance, by type of product used to buy current car, April 2021
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- Figure 42: Assessing what people consider the most important factor in determining affordability, April 2021
Changes to Contract Terms and Monthly Payments
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- 11% of car finance customers have taken a payment holiday over the past year…
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- Figure 43: Changes made to payments or contract term over the past year, by type of product used to acquire current car, April 2021
- …5% extended their contract term
Car-buying Intentions
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- 16% of licence holders are planning to buy a car within the coming year
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- Figure 44: When planning to get (next) car, April 2021
- 53% expect their next car to a be ‘new’ car…
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- Figure 45: Type of car most likely to get, April 2021
- …while 39% are set to go green
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- Figure 46: Type of car most likely to get, by when planning to get next car, April 2021
- 25% expect to acquire their car with finance
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- Figure 47: Funding method likely to use, by when planning to get next car, April 2021
Attitudes towards Car Ownership and Finance
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- Vast majority will go for the best car they can afford
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- Figure 48: Agreement with statements about car ownership and finance, April 2021
- More flexible payment terms and short contracts could widen appeal
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- Figure 49: Agreement with statements about car ownership and finance, by those who used a finance/lease agreement to obtain current car versus those who bought outright or with a loan, April 2021
Appendix – Data Sources and Abbreviations
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- Abbreviations
- Consumer research methodology
- Other sources
Appendix – Market Size and Forecast
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- Total market forecast
- Volume of total new business
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- Figure 50: Volume of consumer car finance contracts sold at the point of sale – fan chart, 2016-26
- Figure 51: Forecast of consumer car finance contracts at the point of sale – best- and worst-case scenarios, 2021-26
- Value of total new business
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- Figure 52: Value of consumer car finance contracts sold at the point of sale – fan chart, 2016- 26
- Figure 53: Forecast of consumer car finance advances at the point of sale – best- and worst-case scenarios, 2021-26
- Sector forecast: new
- Volume of new car business
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- Figure 54: Volume of consumer new car finance contracts sold at the point of sale – fan chart, 2016-26
- Figure 55: Forecast of consumer new car finance contracts at the point of sale – best- and worst-case scenarios, 2021-26
- Value of new car business
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- Figure 56: Value of consumer new car finance contracts sold at the point of sale – fan chart, 2016- 26
- Figure 57: Forecast of consumer new car finance advances at the point of sale – best- and worst-case scenarios, 2021-26
- Sector forecast: used
- Volume of used car business
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- Figure 58: Volume of consumer used car finance contracts sold at the point of sale – fan chart, 2016-26
- Figure 59: Forecast of consumer used car finance advances at the point of sale – best- and worst-case scenarios, 2021-26
- Value of used car business
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- Figure 60: Value of consumer used car finance contracts sold at the point of sale – fan chart, 2016- 26
- Figure 61: Forecast of consumer used car finance advances at the point of sale – best- and worst-case scenarios, 2021-26
- Forecast methodology
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