Table of Contents
Executive Summary
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- The market
- Massive growth in value of car finance advances in the past two years
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- Figure 1: Forecast of the value of point-of-sale car finance, by gross advances, fan chart, 2008-18
- Market factors
- Consumer confidence reaches a five-year high
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- Figure 2: Consumer confidence barometer – UK, January 2009-February 2014
- Strong new car sales give car finance providers a large target market
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- Figure 3: UK new car registrations 2009-13
- PPI compensation used to fund car purchases
- Providers prepare for FCA regulation
- Companies, products and innovations
- Ford credit, VFWS and GMAC are the car finance market leaders
- Little innovation, but a couple of new products
- The consumer
- Car finance is the most commonly used form of credit for car purchases
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- Figure 4: Method of purchasing most recent car, February 2014
- Half of all credit for car purchases is arranged at dealerships
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- Figure 5: Types of company used to arrange credit for most recent car purchase/lease, February 2014
- Less than half of credit-funded car buyers actively researched their finance options
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- Figure 6: Car finance product research prior to purchase, February 2014
- Nearly a third of consumers would not consider car finance, while a quarter are concerned about balloon payments
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- Figure 7: Attitudes towards car finance, February 2014
- Freebies could persuade nearly a quarter to use car finance
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- Figure 8: Attitudes towards car finance providers, February 2014
- What we think
Issues and Insights
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- Impressing and keeping new users is key to supporting recent growth
- The facts
- The implications
- Despite its dominance, point-of-sale finance providers need to work to stay ahead
- The facts
- The implications
- How to improve presence in the used car market?
- The facts
- The implications
Trend Application
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- Borrow a lifestyle instead of buying a car?
- Offer experts to achieve success
- Older consumers have ignored car finance, but this can change
Market Drivers
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- Key points
- Improved confidence signals consumers’ return to the automotive market
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- Figure 9: UK consumer confidence barometer, January 2009-January 2014
- UK car population maintains steady rise…
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- Figure 10: Number of cars in use, 2008-12
- … but the age of cars on the road has increased
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- Figure 11: Comparison of age of cars on the road, by percentage of total, 2008 vs 2012
- Impressive growth in new car sales over the last 18 months…
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- Figure 12: UK new car registrations, 2009-13
- … assisted by record-low interest rates for finance
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- Figure 13: Monthly percentage values of selected interest rates. January 2009 – January 2014
- Compensation from mis-sold PPI has boosted car budgets
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- Figure 14: Monthly value of compensation paid to consumers for mis-sold PPI
- Consumer credit comes under FCA regulation
- Regulator has also raised concerns about GAP insurance
Competitor Products
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- Key points
- Car finance faces competition from many alternative funding methods
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- Figure 15: Method of purchasing most recent car, February 2014
- Demand for consumer credit has increased…
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- Figure 16: Gross consumer credit lending, 2009-13
- … and unsecured loans are most commonly used for car purchases
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- Figure 17: Reasons for taking out most recent loan product, by period of time most recent loan held for, November 2013
- Only a minority of consumers can rely on savings to cover a car purchase
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- Figure 18: Value of saving and investments, November 2013
Market SWOT Analysis
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- Figure 19: Car finance market – SWOT analysis, 2014
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Who’s Innovating?
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- Key points
- Innovation in short supply
- Peugeot’s Just Add Fuel lets drivers pay all car costs in one bill
- New products have been heavily advertised
- FLA helps to make car finance clearer
Market Size and Forecast
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- Key points
- Car finance has experienced major growth in volume and value
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- Figure 20: Volume and value of point-of-sale car finance plans sold (private sector only) 2009-13
- Use of car finance for new car purchases has risen by more than a fifth in two years…
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- Figure 21: Proportion of new private car sales bought with a car finance agreement, 2009-13
- … but there is still low penetration amongst used car sales
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- Figure 22: Proportion of used car sales bought with a car finance agreement, 2009-13
- Car finance plans for new vehicles are driving the market
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- Figure 23: Volume and value of private car finance plans sold, segmented by new and used cars, 2009-13
- Market forecast
- Volume of car finance sales expected to grow by a third in five years
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- Figure 24: Forecast of volume of point-of-sale car finance plans, fan chart 2008-18
- Figure 25: Forecast of volume of point-of-sale car finance plans, 2008-18
- Car finance value expected to top £29bn in 2018
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- Figure 26: Forecast of the value of point-of-sale car finance, by gross advances, fan chart, 2008-18
- Figure 27: Forecast of the value of point-of-sale car finance, by gross advances, at current and constant prices, 2008-18
- Forecast methodology
- Fan chart explanation
Market Share
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- Key points
- Most car finance is arranged at a dealership
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- Figure 28: Types of company used to arrange credit for most recent car purchase/lease, February 2014
- Ford is the top-selling car manufacturer in the UK…
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- Figure 29: Share of UK new car registrations, 2012-13
- … but VWFS have the most wide-reaching partnerships
- GMAC leads the specialist finance market
Companies and Products
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- Ford Credit
- GMAC Financial Services
- Volkswagen Financial Services
- Black Horse Motor Finance
- Santander Consumer Finance
- Personal loan providers
Methods of Funding Car Purchase
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- Key points
- Car finance funds a fifth of car purchases…
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- Figure 30: Method of purchasing most recent car, February 2014
- … but savings are the most common form of car funding
- 25-34-year-olds are most likely to use car finance
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- Figure 31: Ownership of car finance product by age group, February 2014
- New cars are three times more likely to be bought on car finance than used cars
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- Figure 32: Age of purchased car by method of purchasing most recent car, February 2014
Types of Finance Provider Used
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- Key points
- Car dealerships arrange more than half of all credit plans
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- Figure 33: Types of company used to arrange credit for most recent car purchase/lease, February 2014
- HP plans are the most common dealership-based products; personal loans dominate at banks
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- Figure 34: Type of company used to arrange credit for most recent car purchase/lease by product ownership, February 2014
- Banks lead dealers in financing used cars
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- Figure 35: Type of company used to arrange credit for most recent car purchase/lease by age of car bought, February 2014
Car Finance Product Tenure
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- Key points
- Almost 60% of car buyers using credit, did so in the last two years
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- Figure 36: Time since most recent car was purchased/leased where a credit product was used, February 2014
- Young people were most likely to use car finance last year
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- Figure 37: Percentage of car finance plans arranged in the last 12 months by age group, February 2013
Car Finance Product Research
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- Key points
- Less than half of car buyers researched credit options prior to purchase
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- Figure 38: Car finance product research prior to purchase, February 2014
- Men are more likely to have researched credit options
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- Figure 39: Percentage of consumers who researched credit options prior to car purchase/lease by gender, February 2014
- Car finance owners more likely than others to choose their car first…
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- Figure 40: Car finance product research, by type of product used
- … while other credit holders are more likely to choose funding first
General Attitudes Towards Car Finance
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- Key points
- Consumers remain wary of credit
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- Figure 41: Attitudes towards car finance, February 2014
- Low deposits and fixed payments are important for car finance users
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- Figure 42: Attitudes towards car finance by certain methods of purchasing most recent car, February 2014
- More recent buyers are less concerned about balloon payments…
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- Figure 43: Attitudes towards car finance by age of most recent finance product, February 2014
- … and are open to leasing, as long as they have control over how they use the car
Attitudes Towards Car Finance Providers
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- Key points
- Freebies make people more likely to take out car finance
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- Figure 44: Attitudes towards car finance providers, February 2014
- High-income households are more interested in the product than the provider
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- Figure 45: Percentage of consumers who said the terms of the product were more important than the type of provider, by annual household income, February 2014
- Younger car buyers are more likely to value car-buying advice
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- Figure 46: Percentage of car owners/those who intend to buy a car who would be more likely to borrow from a bank if they could get car advice, by age group February 2014
- Car finance holders favour dealerships
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- Figure 47: Attitudes towards car finance providers by certain product ownership, February 2014
Appendix – Market Size and Forecast
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- Volume
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- Figure 48: Best- and worst-case forecast of the volume of car finance plans sold, 2013-18
- Value
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- Figure 49: Best- and worst-case forecast of the value of car finance, by gross advances, 2013-18
Appendix – Product Ownership
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- Figure 50: Ownership of products used to fund the purchase of a car by demographics, February 2014
- Figure 51: Ownership of products used to fund the purchase of a car (continued) by demographics, February 2014
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- Figure 52: Ownership of products used to fund the purchase of a car, (continued) by demographics, February 2014
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Appendix – Types of Finance Provider
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- Figure 53: Types of finance provider by demographics, February 2014
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Appendix – Car Finance Product Tenure
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- Figure 54: Age of most recent finance product by demographics, February 2014
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Appendix – Car Finance Product Research
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- Figure 55: Car finance product research prior to purchase, by demographics, February 2014
- Figure 56: Car finance product research prior to purchase (continued), by demographics, February 2014
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Appendix – Attitudes Towards Car Finance
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- Figure 57: Most popular attitudes towards car finance by demographics, February 2014
- Figure 58: Next most popular attitudes towards car finance by demographics, February 2014
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Appendix – Attitudes Towards Car Finance Providers
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- Figure 59: Most popular attitudes towards car finance providers by demographics, February 2014
- Figure 60: Next most popular attitudes towards car finance providers by demographics, February 2014
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Appendix – Additional Research on PPI Compensation
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- Figure 61: Total amount of compensation received by successful PPI mis-selling claimants, April 2014
- Figure 62: Most popular uses of PPI compensation, April2014
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