Table of Contents
Executive Summary
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- The market
- Healthy demand will continue to underpin new sales growth
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- Figure 1: Volume of point-of-sale (private) car finance plans – Fan chart, 2009-19
- Annual car finance advances predicted to rise to £36 billion by 2019
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- Figure 2: Value of point-of-sale (private) car finance plans – Fan chart, 2009-19
- Market factors
- Three in four new car sales were funded by point-of-sale dealer finance in 2014
- Booming new car sales
- Increased compliance costs
- Companies, brands and innovation
- Most of the major manufacturers fund their own finance operations
- Product innovation
- Brand reinforcement
- Dealers dominate the sale the cars, with limited transactions being generated online
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- Figure 3: Channels used to purchase last car, February 2015
- The consumer
- High levels of car ownership in the UK
- 18% used dealer finance to fund their last car purchase
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- Figure 4: Method of financing most recent car purchase, February 2014
- Consumers look for affordability and convenience when deciding which credit option to use
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- Figure 5: Influential factors affecting decision to use particular finance option, February 2015
- 85% of car finance customers would consider using their preferred credit option again
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- Figure 6: Agreement with statements regarding most recent car finance or loan, ranked in order of significance, February 2015
- 48% of households are planning to buy a car within the next three years
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- Figure 7: Likelihood of buying a car within the next three years, February 2015
- What we think
Issues and Insights
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- Are we becoming a nation of car renters and how long will the boom last?
- The facts
- The implications
- Greater pricing transparency should lead to higher trust levels and greater loyalty
- The facts
- The implications
- Car finance providers have nothing to fear from competition from high street lenders
- The facts
- The implications
Trend Application
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- Trend: Access Anything, Anywhere
- Trend: Why Buy?
- Trend: Collective Intelligence
Market Drivers
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- Key points
- UK car sales boom in 2014…
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- Figure 8: Volume of new car registrations and used car sales via dealers, 2009-15
- … but can it be repeated in 2015?
- Nearly half of all new car sales are to private customers
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- Figure 9: New car registrations, by type, 2009-15
- Feel-good factor helps drive demand for finance
- Margins on loan rates are falling steadily as competition heats up
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- Figure 10: Average advertised unsecured loan rate, finance house base rate and three-month LIBOR, January 2008-January 2015
- Update on consumer credit legislation and the shift towards full authorisation
- The added cost of compliance could force some firms to cease offering credit
Market SWOT Analysis
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- Figure 11: Point-of-sale car finance – Market strengths, weaknesses, opportunities and threats, 2015
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Who’s Innovating?
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- Key points
- LBG launches secured car finance proposition in new digital drive
- Alphera in push to build on recent success with new CRM propositions
- New sub-prime products emerge to target increasing numbers of ‘cash-rich, credit-poor’
Market Size and Forecast
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- Strong rise in demand for car finance
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- Figure 12: Volume and value of car finance contracts sold through dealerships (private sector only), 2009-14
- More than half of all car finance plans are taken out by used car buyers
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- Figure 13: Volume and value of private car finance contracts sold via dealerships, segmented by new and used cars, 2009-14
- Mintel predicts the market to growth at a healthy rate over the next five years
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- Figure 14: Volume of point-of-sale (private) car finance plans – Fan chart, 2009-19
- Figure 15: Value of point-of-sale (private) car finance plans, at current prices – Fan chart, 2009-19
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- Figure 16: Forecast of the point-of-sale (private) car finance market, by volume and value, 2009-19
Market Penetration
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- Key points
- Three in four new cars bought with dealer finance in 2014
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- Figure 17: Proportion of new private car sales bought with a car finance agreement, 2009-14
- The growth of PCPs is helping to drive to new car sales…
- …but is there potentially a spoke in the wheel?
- Car finance accounts for a much smaller share of used car sales
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- Figure 18: Proportion of used car sales bought with a car finance agreement, 2009-14
Market Share
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- Key points
- Most car manufacturers have in-house finance operations
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- Figure 19: Share of new car registrations, by manufacturer, 2013-14
Companies and Products
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- Specialist providers
- Manufacturer subsidiaries
Brand Communication and Promotion
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- Key points
- Limited above-the-line adspend devoted purely to car finance products
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- Figure 20: Advertising expenditure on car finance and related loan products, 2011-15
- Media mix varies from year to year
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- Figure 21: Advertising expenditure on car finance, by media type, 2013/14-2014/15
- Barclays uses direct mail to promote to its unsecured loan as a financing solution for buying a car
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- Figure 22: Top five advertisers in the car finance market, 2014/15
Channels to Market
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- Key points
- The vast majority of car finance is sold on the forecourt
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- Figure 23: Channel used to purchase last car, February 2015
Car Ownership
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- Key points
- Survey background
- Car ownership is determined as much by need as wealth
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- Figure 24: Car ownership, February 2015
- More car owners buy second-hand than new
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- Figure 25: Condition of car when bought, February 2015
- The majority of both new and used cars are sold through dealers
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- Figure 26: Where last car was bought, February 2015
- One in ten non-car owners drive a car belonging to someone else
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- Figure 27: Proportion of non-car owners who lease or drive a car they do not own, February 2015
Method of Funding Car Purchase
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- Key points
- 18% used car finance to fund their last car purchase
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- Figure 28: Method of financing most recent car purchase, February 2014
- 9% used their credit card
- Car finance customers are more likely to part exchange
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- Figure 29: Method of financing most recent car purchase – Cross-analysis, February 2014
- Rise in serial renters
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- Figure 30: Method of financing most recent car purchase, by condition of car when bought, February 2014
- HP is now as popular with used car buyers as new
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- Figure 31: Method of financing most recent car purchase, by condition of car and length of time ago bought, February 2014
Factors Influencing Decision to Use Car Finance
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- Key points
- Most plump for a solution that is affordable, convenient and familiar…
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- Figure 32: Influential factors affecting decision to use particular finance option, February 2015
- …but a recommendation also helps to sway choice
- PCP and lease plan holders are more likely to become repeat customers
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- Figure 33: Influential factors affecting decision to use particular finance option, by method of finance used, February 2015
Experience of and Attitudes toward Car Finance
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- Key points
- Survey results suggest high customer satisfaction levels
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- Figure 34: Agreement with statements regarding most recent car finance or loan, ranked in order of significance, February 2015
- 64% of customers opting for a PCP or lease agreement say it enabled them to get a better spec of car
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- Figure 35: Agreement with statements about arranging most recent car finance or loan – Positive experiences, February 2015
- Some small variation in the level of customers reporting negative experiences across the three main product types
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- Figure 36: Agreement with statements about arranging most recent car finance or loan – Negative experiences, February 2015
- All three product types share similarly high levels of endorsement
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- Figure 37: Agreement with statements about arranging most recent car finance or loan – Future consideration and positive endorsement, February 2015
Car Purchasing and Leasing Intentions
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- Key points
- Nearly half of all UK households have plans to buy at least one car within three years…
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- Figure 38: Likelihood of buying a car within the next three years, February 2015
- …of which a significant proportion will use finance to fund the purchase
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- Figure 39: Proportion of prospective car buyers who used a loan or car finance to fund their last purchase February 2015
- Around 6 million households expect to buy a car within the coming year
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- Figure 40: When expecting to make next car purchase, February 2015
- The gap between new and used narrows when it comes to people’s aspirations
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- Figure 41: Condition of car likely to buy, February 2015
- Results indicate a high level of interest in car leasing
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- Figure 42: Intentions to lease a new or used car within the next 12 months, February 2015
Appendix – Market Size and Forecast
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- Total market forecast - Best- and worst-case scenarios
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- Figure 43: Forecast of private car finance plans (volume) - Best- and worst-case scenarios, 2014-19
- Figure 44: Forecast of private car finance plans (value) – Best- and worst-case scenarios, at current prices, 2014-19
- New car sector forecast – Best- and worst-case scenarios
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- Figure 45: Forecast of private car finance plans (volume) in the new car sector – Best- and worst-case scenarios, 2014-19
- Figure 46: Forecast of private car finance plans (value) in the new car sector – Best- and worst-case scenarios, at current prices, 2014-19
- Used car sector forecast – Best- and worst-case scenarios
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- Figure 47: Forecast of private car finance plans (volume) in the used car sector – Best- and worst-case scenarios, 2014-19
- Figure 48: Forecast of private car finance plans (value) in the used car sector – Best- and worst-case scenarios, at current prices, 2014-19
- Forecast methodology
- Fan chart explanation
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