Table of Contents
Executive Summary
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- The market
- Expansion of the market is set to continue
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- Figure 1: Value of car finance contracts sold through dealerships (private sector only) – Fan chart, 2010-20
- Figure 2: Volume of car finance contracts sold through dealerships (private sector only) – Fan chart, 2010-20
- Use of finance growing in both new and used car markets
- PCP dominates market with leasing recording strong growth for new car sales
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- Figure 3: New and used private car finance by product type (value), 2016*
- Companies and brands
- Small number of companies dominate the market
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- Figure 4: Leading finance providers for new cars (Dealer sales)*, 2015
- PCP, HP and leasing are offered by many of the leading car finance companies
- Upward trend in advertising expenditure
- The consumer
- A third of buyers are interested in leasing a car
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- Figure 5: Car finance, February 2016
- Savings are the most popular method of paying for a car
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- Figure 6: Car payment methods, February 2016
- Many users have a conservative approach towards car finance
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- Figure 7: Use of loan or finance agreements, February 2016
- Not all organisations offered car finance are viewed the same
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- Figure 8: Performance of organisations offering loans/finance by value for money, February 2016
- Mixed viewed towards statements associated with car finance
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- Figure 9: Statements about car finance, February 2016
- What we think
Issues and Insights
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- Potential offered by the used car sector
- The facts
- The implications
- Evolution of car finance market will continue
- The facts
- The implications
- Preparing for the worst
- The facts
- The implications
The Market – What You Need to Know
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- Strong growth reported in car finance …
- … with new cars a more valuable market
- Strong car sales vital for market
- PCP dominates the car finance market
- Dealers account for two thirds of car sales
Market Size and Forecast
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- Car finance outperforms car sales
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- Figure 10: Volume and value of car finance contracts sold through dealerships (private sector only), 2010-15
- Further expansion of the market expected
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- Figure 11: Volume and value of car finance contracts sold through dealerships (private sector only) – 2010-20
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- Figure 12: Value of car finance contracts sold through dealerships (private sector only) – Fan chart, 2010-20
- Figure 13: Volume of car finance contracts sold through dealerships (private sector only) – Fan chart, 2010-20
- Forecast Methodology
Market Segmentation
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- Strong growth for both new and used finance
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- Figure 14: Volume and value of private car finance contracts sold via dealerships, segmented by new and used cars, 2010-15
- Finance penetration surpasses 80% of new car sales
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- Figure 15: Proportion of new private car sales bought with a car finance agreement, 2010-15
- Limited, if growing presence, for used car finance
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- Figure 16: Proportion of used car sales bought with a car finance agreement, 2010-15
- Leasing and PCP are proving important drivers for the market …
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- Figure 17: New and used private car finance by product type (value), 2015-16*
- … although both have their limitations
Channels to Market
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- Franchised dealers dominate within the overall market
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- Figure 18: Sales of new and used cars by channel (by volume), 2013-15
- Main dealers dominate the consumer market
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- Figure 19: Where was last car purchased, February 2016
Market Drivers
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- Car market records upward trend in sales
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- Figure 20: New and used car market volumes, 2010-15
- New car market showing signs of slowdown
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- Figure 21: Best- and worst-case forecasts for UK new and used sales, 2010-20
- Private sales represent an important market
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- Figure 22: UK new registrations of motor vehicles, 2010-15
- Performance of the UK economy proving helpful
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- Figure 23: Mintel’s wellbeing index, February 2009 - November 2015
- Over half of adults plan to buy a car in the next three years
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- Figure 24: Intention to purchase a car/s in the next three years, February 2016
- No obvious preference for buying new or used
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- Figure 25: Intention to purchase a car/s in the next three years, by new or second-hand purchase, February 2016
- Falling interest rates on unsecured loans suggests stronger competition for finance providers
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- Figure 26: Monthly percentage values of selected interest rates. January 2009-February 2016
- PCP injects new life into the market
- FCA consumer credit regime continues to evolve
Companies and Brands – What You Need to Know
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- Most car manufacturers have their own in-house finance company
- Product and partnership strategies are both important
- Technology and flexibility dominate innovations
- Promotional expenditure is increasing
Market Share
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- Manufacturers take a leading role in the market
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- Figure 27: Manufacturer shares of new car registrations, 2015
- VW and Ford account for a third of dealer finance
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- Figure 28: Leading finance providers for new cars (Dealer sales)*, 2015
Competitive Strategies
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- A tale of two markets
- Use of partnerships
- Offering a range of products
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- Figure 29: Finance products offered by leading players in car market (manufacturer subsidiary and specialist providers), 2016
- Developing new services and markets
Launch Activity and Innovation
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- Ford looks towards group ownership of a vehicle
- Close Brothers introduces referral service for dealers
- Alphera also looking to help the dealer market
- Black Horse streamlines applications with SignIt …
- … while Halifax customers benefit from a new online finance facility
- Scrappage and finance
- Honda working with Arval to develop contract hire
Advertising and Marketing Activity
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- Upward trend in advertising expenditure
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- Figure 30: Total above-the-line, online display and direct mail advertising expenditure on car finance and related loan products, 2012-16
- Majority of expenditure directed towards loans
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- Figure 31: Total above-the-line, online display and direct mail advertising expenditure on car finance and related loan products, 2012-16
- PCP grows to dominate activity within car finance sector
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- Figure 32: Total above-the-line, online display and direct mail advertising expenditure on car finance (motor manufacturer finance and personal contract plans), 2012-16
- Two companies dominate the market
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- Figure 33: Top five advertisers in the car finance market (above-the-line, online display and direct mail advertising) 2016
- Television advertising increasing its profile
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- Figure 34: Total above-the-line, online display and direct mail advertising expenditure on car finance, by media type, 2015- 16
- Nielsen Ad Intel coverage
The Consumer – What You Need to Know
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- Two thirds of adults own a car
- A third of buyers are interested in leasing a vehicle
- Savings are the preferred method of paying for a car
- Familiarity with a finance product is important for many
- Banks, building societies and dealerships all perform well
- Fixed monthly payments are popular
Car Ownership
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- Two thirds of adults own a car
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- Figure 35: Car ownership, February 2016
- Older cars dominate the market
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- Figure 36: Statements about car ownership, February 2016
- New cars popular with men
- Young adults are more likely to be recent purchasers
- Income plays a major factor in choice of vehicle
- New cars popular with urban buyers
- Many of those without a car also do not hold a driving licence
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- Figure 37: Statements about car use by those not owning a car, February 2016
- Low earners and women are least likely to drive
Car Finance
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- Around a third of buyers are interested in leasing a car
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- Figure 38: Car finance, February 2016
- Leasing is popular with high income earners
- Young adults have a strong interest in leasing a used car
- Lease appeal is strong amongst those living in urban areas
- Families find leasing of interest
Methods of Paying for a Car
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- Savings dominate as a method of payment
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- Figure 39: Car payment methods, February 2016
- Different age groups prefer different payment methods
- Wealthy are more likely to opt for loan or lease agreement …
- … although contract hire and PCP have broad appeal
- Car finance popular with other groups
- Age and income both impact on number of payment methods used
Use of Loan and Finance Agreements
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- Past use and research are important factors affecting choice of finance
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- Figure 40: Use of loan or finance agreements, February 2016
- Men and women have different perspectives on car finance
- Demands of ABC1s force their use of particular finance products
- Families are more likely to plan ahead
Performance of Lending Organisations
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- Financial institutions score well where the buyer has an account
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- Figure 41: Performance of organisations offering loans/finance by value for money, February 2016
- Banks and building societies fail to appeal strongly with women
Statements about Car Finance
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- Views on car finance suggest interest in a variety of different package types
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- Figure 42: Statements about car finance, February 2016
- Car finance of interest to young adults …
- … with many wanting the flexibility it offers
- Fixed and reduced payments are important for ABC1s
- Parents appear worried about costs
Appendix – Data Sources, Abbreviations and Supporting Information
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- Abbreviations
- Consumer research methodology
Appendix – Market Size and Forecast
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- Forecast Data
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- Figure 43: Forecast of private car finance plans (value) – best and worst case scenarios, 2015-20
- Figure 44: Forecast of private car finance plans for new cars (value) – best and worst case scenarios, 2015-20
- Figure 45: Forecast of private car finance plans for used cars (value) – best and worst case scenarios, 2015-20
- Figure 46: Forecast of private car finance plans (volume) – best and worst case scenarios, 2015-20
- Figure 47: Forecast of private car finance plans for new cars (volume) – best and worst case scenarios, 2015-20
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- Figure 48: Forecast of private car finance plans for used cars (volume) – best and worst case scenarios, 2015-20
- Forecast Methodology
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