UK Car Finance Market Report 2023
£ 2,195 (Excl.Tax)
Description
Stay ahead of the curve and secure future growth for your business with Mintel’s UK Car Finance Market Report 2023. Our full report is packed with consumer-led market intelligence, the latest trends and consumer behaviours affecting your industry. Get a 360° view of the UK car finance industry including market size, share and forecasted growth to help you align your business strategy with the needs of your audience.
Below, we’ve handpicked the key insights analysed in the full report and summarised the core topics.
Key Areas Covered in this Report
- Economic context and market drivers.
- Competitive strategies, launch activity and advertising initiatives in the market.
- Types of car finance and popular features.
- Consumer car purchasing intentions and finance preferences.
- Consumer behaviour towards the car finance market.
UK Car Finance Market – Current Landscape
The ongoing cost-of-living crisis is having an impact on the UK car finance market. Personal finances are affected and the price of used cars remain high, so more drivers are likely to keep their current car for longer. This has a knock-on effect of reducing the demand for new finance agreements. Production and supply chain issues have also limited the opportunities for car finance.
Mintel forecasts that car finance market size will increase over the next five years, but not before experiencing an estimated 4% decline.
UK Car Finance Market Trends and Opportunities
Expanded affordability checks
Many drivers are delaying plans to replace their car. However, among those that do buy in the next three years, almost a quarter are expecting to use car finance. In the current volatile economic climate, more consumers are concerned about being able to afford to purchase a car. These concerns can be eased with more stringent affordability checks at the time of purchase. By ensuring customers do not take on finance that places their personal finance under unnecessary strain, a provider will be able to build trust and loyalty with their customers.
Omnichannel Services
Many consumers now expect easy-to-use, personalised digital services, similar to what they experience in other financial services markets. Companies should provide strong digital offerings, so tech-savvy consumers can start their car purchasing journey online. But in-person experiences are also vital for the car finance market. Mintel found that a higher percentage of all age groups would be most likely to use an in-person broker/dealer to find a new car finance agreement.
More About This Report
The focus of this report is on car finance products sold to consumers at the point of sale. The most popular car finance products are hire purchase, personal contract purchase and personal contract hire agreements. Wider information about the UK car market can be found in the UK Car Purchasing Market Report.
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Purchase our full UK Car Finance Market Report 2023 to discover lucrative opportunities to help your business grow during times of financial uncertainty.
Expert Insights from a Financial Services Specialist
This report, written by Lewis Cone, a leading financial services analyst, delivers in-depth commentary and analysis to highlight current trends in the UK car finance market and add expert context to the numbers.
Car finance continues to offer a more affordable solution for those who are unable to buy a car outright. Although the current economic situation has made the flexibility offered by alternative purchasing methods, such as car subscription services, appealing, consumers are still unsure on aspects such as contract lengths and payment terms, meaning they are still likely to use finance when purchasing their next car.
Lewis Cone
Associate Director – Financial Services
Table of Contents
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Overview
- Key issues covered in this Report
- Products covered in this Report
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Executive Summary
- The five-year outlook for car finance
- Figure 1: Five-year outlook for car finance, 2023-28
- The market
- Market size and forecast
- Figure 2: Market forecast for car finance contracts sold at point of sale – Value, 2023-28
- Seven-year low in new cars bought through finance…
- …whilst record number of used cars were bought via finance
- Companies and brands
- Volkswagen remains UK’s leading car supplier in 2022
- Evolution Funding and Motiv Finance offer advanced credit pre-screening solution
- Stellantis streamlines finance operations
- Metro Bank launches digital car loan product
- The consumer
- A fifth of drivers used car finance to buy current car
- Figure 3: Method of acquiring current car, 2023
- PCP remains most common type of finance arrangement
- Figure 4: Use of car finance products, by condition of car, 2023
- Most buyers would select their car of choice before looking for finance
- Half of consumers prefer to buy next car outright
- Figure 5: Intended purchase method for next car, 2023
- Low monthly payments and choice of car key when choosing a product
- Figure 6: Car finance purchase factors, 2023
- In-person car brokers and dealers remain vital information sources
- Figure 7: Car finance information sources, 2023
- The rising cost of living is hampering car buying ambitions
- Figure 8: Consumer attitudes towards car finance, 2023
- The five-year outlook for car finance
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Issues and Insights
- Expand affordability checks to ease cost of living concerns
- Providers should promote and expand ‘green’ car finance
- Consumer duty provides chance to improve product understanding
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Market Size and Performance
- Value of car finance market rises by 11% in 2022…
- Figure 9: Volume and value of consumer car finance contracts sold at the point of sale, 2018-22
- …but volume remains 8% below pre-pandemic figures
- Average advances continue to rise, prompting some concern
- Figure 10: Average advance for consumer car finance contracts sold at the point of sale, 2003-22
- Value of car finance market rises by 11% in 2022…
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Market Forecast
- Supply chain concerns ease but car finance continues to face challenges
- Figure 11: Five-year outlook for car finance, 2023-28
- Value of car finance arrangements forecast to reach £45 billion by 2028
- Figure 12: Market forecast for consumer car finance contracts sold at the point of sale – Value, 2023-28
- Figure 13: Market forecast for consumer car finance contracts sold at the point of sale – Value, 2023-28
- Volume of finance contracts sold to also rise, but at a slower rate
- Figure 14: Market forecast for consumer car finance contracts sold at the point of sale – Volume, 2023-28
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- Figure 15: Market forecast for consumer car finance contracts sold at the point of sale – Volume, 2023-28
- Learnings from the last income squeeze
- Figure 16: Volume and value of consumer car finance contracts sold at the point of sale, 2007-14
- Forecast methodology
- Supply chain concerns ease but car finance continues to face challenges
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Market Segmentation
- Volume and value of new car finance declines in 2022…
- Figure 17: Volume and value of consumer car finance contracts sold at the point of sale, by condition of car, 2018-22
- …whilst volume and value of used car finance grows
- Volume and value of new car finance declines in 2022…
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Car Finance Penetration
- Seven-year low in new car sales bought through finance
- Figure 18: Proportion of new private car sales bought with a car finance agreement, 2013-22
- PCP most popular for new cars
- Figure 19: Proportional distribution of consumer car finance contracts sold at the point of sale (new cars), by product type, 2020-22
- Over a fifth of used car sales now funded by finance…
- Figure 20: Proportion of used car sales bought with a car finance agreement, 2013-22
- …and HP plans are the most popular form of finance
- Figure 21: Proportional distribution of consumer car finance contracts for used cars sold at the point sale, by product type, 2020-22
- Seven-year low in new car sales bought through finance
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Channels to Market
- Dealerships remain biggest channel for new and used car sales
- Figure 22: Channel used to purchase cars within the past two years, by type of car, 2022
- Online channel use growing, but needs to build upon appeal with younger motorists
- Dealerships remain biggest channel for new and used car sales
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Economic Context
- High inflation is leading to affordability concerns…
- Figure 23: CPI and CPIH rates, 2020-23
- …with most people feeling the effects of price rises
- Figure 24: Consumer concerns about household finances, 2023
- Base rate rises leading to a rise in monthly payments on new finance agreements
- High inflation is leading to affordability concerns…
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Market Drivers
- Fuel prices starting to fall, but remain higher than in 2021
- Figure 25: Weekly road fuel prices, by price per litre, 2021-23
- New registrations and used car sales both decline in 2022…
- Figure 26: Volume of new car registrations and used car sales, 2015-22
- …although there are signs of improvement in 2023 to date
- The electric car market grew by 40% in 2022…
- …with new Zero Emissions Vehicle Mandate likely to boost sales from 2024
- Consumer Duty will push greater customer support, guidance, and fair value
- iVendi launch ‘single point solution’ for compliance
- Fuel prices starting to fall, but remain higher than in 2021
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The Main Suppliers
- Volkswagen remains new car market leader…
- Figure 27: Share of new car registrations (private, business and fleet), by manufacturer, 2021-22
- …whilst Ford reclaims second position
- Tesla makes its move by cutting the price of its EVs
- Ford Fiesta most popular used car model
- Figure 28: Top ten models for used car sales, 2022
- Other brands continue to play a key role in the market
- Volkswagen remains new car market leader…
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Competitive Strategies
- Carmoola raises funds to carry out its financing ‘revolution’
- Evolution Funding and Motiv Finance to offer advanced credit pre-screening solution
- Evolution acquires Motion Finance to accelerate its growth strategy
- Blue Motor Finance looks to improve customer outcomes and enhance its AI offering
- Stellantis streamlines finance operations
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Launch Activity
- Metro Bank launches digital car loan product
- Blue Motor Finance launches app to help people find their next car
- Close Brothers Motor Finance launches remote electronic signature solution
- Mobilize Financial Services launches Lease&Co
- Freedom Finance launches new tailored finance service
- NIO to enter the UK market this year via the launch of three vehicles through subscription
- Experian links up with CarCloud to improve finance eligibility checks
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Advertising and Marketing Activity
- Above-the-line advertising on car finance rises to three-year high…
- Figure 29: Total above-the line, online display and direct mail advertising expenditure on car finance and unsecured personal loans, 2018/19-2022/23
- …spread largely across digital and radio channels
- Figure 30: Total above-the-line, online display and direct mail advertising expenditure on car finance, by media type, 2020/21-2022/23
- Digital finance platform CarFinance 247 was biggest spender in 2022/23
- Figure 31: Top five advertisers of car finance products via above-the-line, online display and direct mail channels, 2020/21-2022/23
- Wider car market spent £307 million in ATL advertising in 2022/23
- Figure 32: Total above-the line, online display and direct mail advertising expenditure on cars, 2020/21-2022/23
- Nielsen Ad Intel coverage
- Above-the-line advertising on car finance rises to three-year high…
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Method of Acquiring Current Car
- A fifth of drivers used car finance to buy current car
- Figure 33: Method of acquiring current car, 2023
- Likelihood of outright car purchases increases with age
- Figure 34: Method of acquiring current car, by age, 2023
- Finance is most popular option with new car buyers
- Figure 35: Method of acquiring current car, by condition of car, 2023
- A fifth of drivers used car finance to buy current car
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Type of Car Finance Used
- PCP remains most common type of finance arrangement…
- …providing peace of mind at a time of economic uncertainty
- Figure 36: Use of car finance products, by condition of car, 2023
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Car Purchasing Intentions and Methods
- Most buyers would select their car of choice before looking for finance
- Figure 37: Finance arrangement preference, 2023
- Used petrol/diesel cars remain the most popular options…
- …although interest in both new and used car purchase has fallen on 2022
- Figure 38: Types of cars consumers are planning to purchase in the next three years, 2023
- Half of consumers prefer to buy next car outright…
- Figure 39: Intended purchase method for next car, 2023
- Few plan to use car subscription schemes, but this could change with economic situation and education
- Electric and hybrid cars most likely to be bought on finance
- Figure 40: Intended purchase method for next car, by type of car consumers plan to purchase, 2023
- Most buyers would select their car of choice before looking for finance
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Car Finance Purchase Factors
- Low monthly payments and choice of car are key when choosing a finance option…
- …with less importance attached to interest rates
- Figure 41: Car finance purchase factors, 2023
- Providers need to improve used car customer experience and offering
- Figure 42: Car finance product purchase factors, by condition of car – Net, 2023
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Finance Information Sources
- Price comparison sites used by a third to source finance and loans
- Figure 43: Car finance information sources, 2023
- In-person car brokers and dealers a vital source for older drivers…
- …providing opportunities for omnichannel source development
- Figure 44: In-person and online car broker/dealer information use, by age, 2023
- Family and friends prove most useful to younger drivers
- Figure 45: Family/friends information use, by age, 2023
- Price comparison sites used by a third to source finance and loans
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Attitudes towards Car Finance
- Consumers are very confident when it comes to car finance
- Figure 46: Consumer attitudes towards car finance, 2023
- Half of under-35s plan to own an EV in the next five years…
- …but uptake will be determined by incentives and infrastructure
- Figure 47: Planned EV ownership, by age, 2023
- Providers must be wary of younger drivers’ interest in car subscription
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- Figure 48: Interest in car subscription services, by age, 2023
- The rising cost of living is hampering car buying ambitions
- Figure 49: Impact of the rising cost of living on car purchases, by age, 2023
- Consumers are very confident when it comes to car finance
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Appendix – Data Sources, Abbreviations and Supporting Information
- Abbreviations
- Consumer research methodology
- Other sources
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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, 2023-28
- Volume of total car finance business
- Figure 51: Market forecast for volume of car finance new contracts, including lower and upper bounds, 2023-28
- Segment forecast: new
- Value of new car finance business
- Figure 52: Market forecast for value of car finance new contracts for new cars, 2023-28
- Figure 53: Market forecast for value of car finance new contracts for new cars, including lower and upper bounds, 2023-28
- Volume of new car finance business
- Figure 54: Market forecast for volume of car finance new contracts for new cars, 2023-28
- Figure 55: Market forecast for volume of car finance new contracts for new cars, including lower and upper bounds, 2023-28
- Segment forecast: used
- Value of used car finance business
- Figure 56: Market forecast for value of car finance new contracts for used cars, 2023-28
- Figure 57: Market forecast for value of car finance new contracts for used cars, including lower and upper bounds, 2023-28
- Volume of used car finance business
- Figure 58: Market forecast for volume of car finance new contracts for used cars, 2023-28
- Figure 59: Market forecast for volume of car finance new contracts for used cars, including lower and upper bounds, 2023-28
- Market drivers and assumptions
- Forecast methodology
About the report
This market report provides in-depth analysis and insight supported by a range of data. At the same time, introductory and top-level content is provided to give you an overview of the issues covered.
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