Table of Contents
Overview
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- What you need to know
- Products covered in this Report
Executive Summary
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- The market
- Growth in car finance contracts fell sharply in 2017
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- Figure 1: Forecast of value of car finance contracts sold through dealerships (private sector only) – Fan chart, 2012-22
- Almost half of all sales are arranged through franchised dealers
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- Figure 2: Sales of new and used car volumes, by channel, 2013-17
- Companies and brands
- Dealerships dominate the car finance point of sale
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- Figure 3: Car finance providers used, March 2018
- PCPs account for the vast majority of adspend
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- Figure 4: Total above-the-line, online display and direct mail advertising expenditure on car finance and leasing products, 2015/16-2017/18
- The consumer
- Two thirds of consumers own a car
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- Figure 5: Car ownership, March 2018
- 22% used car finance to buy their last car
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- Figure 6: How people paid for the last car they bought or leased, March 2018
- HP and PCP dominate the car finance market
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- Figure 7: Type of car finance used, March 2018
- Car dealerships have a stranglehold on distribution of car finance
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- Figure 8: Sources of information used to research most recent car finance product, March 2018
- Consumers are very confident that they understand their finance deal
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- Figure 9: Attitudes towards current car finance product, March 2018
- Borrowing for cars is still taboo for many
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- Figure 10: Attitudes towards car finance, March 2018
- What we think
Issues and Insights
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- Use of consumer credit to access car finance is a worrying sign
- The facts
- The implications
- Understanding is high but there’s room for better education
- The facts
- The implications
- Subscriptions can satisfy young drivers’ demand for convenience
- The facts
- The implications
The Market – What You Need to Know
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- Growth in car finance contracts plummeted in 2017
- Car finance accounts for 88% of private new car sales
- Car sales fell in 2017, while the FCA is continuing to investigate the car finance market
- Almost half of all sales are arranged through franchised dealers
Market Size and Forecast
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- Growth in car finance contracts fell in 2017…
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- Figure 11: Volume and value of car finance contracts sold through dealerships (private sector only), 2013-17
- …but the average value grew by 6%
- Lending forecast to reach £49 billion in 2022…
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- Figure 12: Forecast of value of car finance contracts sold through dealerships (private sector only) – Fan chart, 2012-22
- Figure 13: Forecast of value of car finance contracts sold through dealerships (private sector only), 2012-22
- …supported by steady growth in volume
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- Figure 14: Forecast of volume of car finance contracts sold through dealerships (private sector only) – Fan chart, 2012-22
- Figure 15: Forecast of volume of car finance contracts sold through dealerships (private sector only) – Fan chart, 2012-22
- Forecast methodology
Market Segmentation
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- The market was reliant on used car sales for growth last year
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- Figure 16: Volume and value of private car finance contracts sold via dealerships, segmented by new and used cars, 2013-17
- Small increase in penetration of car finance
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- Figure 17: Proportion of new private car sales bought with a car finance agreement, 2013-17
- Figure 18: Proportion of used car sales bought with a car finance agreement, 2013-17
Market Drivers
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- Car sales fell in 2017
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- Figure 19: New and used car market volumes, 2012-17
- Figure 20: UK new and used car sales, by volume, 2012-22
- FCA investigation into car finance continues…
- …but a March 2018 update was encouraging
- Half plan to buy a car in the next three years…
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- Figure 21: Intention of purchasing a car/s in the next three years, 2015-17
- …and new cars are most in demand
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- Figure 22: Likelihood of new or used purchase, December 2017
- A base rate rise, but borrowing conditions remain favourable
Channels to Market
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- Almost half of all sales are arranged through franchised dealers
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- Figure 23: Sales of new and used car volumes, by channel, 2013-17
Companies and Brands – What You Need to Know
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- Ford is the biggest manufacturer of new cars in the UK
- Companies are improving online and used car propositions
- PCPs account for the vast majority of adspend
Market Share
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- Dealerships dominate the car finance point of sale
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- Figure 24: Car finance providers used, by sources of information used to research most recent car finance product, March 2018
- Ford is the biggest manufacturer of new cars in the UK
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- Figure 25: Manufacturer shares of new car registrations, 2017
Competitive Strategies
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- Firms focus on developments in online services…
- Digital innovations are improving the customer journey
- Manufacturers are developing their services to stay ahead…
- …but are the tech giants the future of online car sales?
- …and used car solutions
- Peugeot looks to address residual stock
- Payment Swap looks to serve mid-term PCP customers
- Vertu Motors introduces online sales platform for used cars
- More competition in comparison
- Santander signs deals to provide finance for some British classics
- Drover and Drive-Hive introduce differing subscription models
Advertising and Marketing Activity
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- PCPs account for the vast majority of adspend
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- Figure 26: Total above-the-line, online display and direct mail advertising expenditure on car finance and leasing products, 2015/16-2017/18*
- CarFinance 247 is the highest spending advertiser in car finance
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- Figure 27: Top 10 advertisers of above-the-line, online display and direct mail advertising expenditure on car finance and leasing products, 2015/16-2017/18*
- Digital advertising is the dominant promotions channel
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- Figure 28: Total above-the-line, online display and direct mail advertising expenditure on car finance and leasing products, by media type, 2017/18*
- Alternative credit products benefit from far higher, if falling, adspend
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- Figure 29: Total above-the-line, online display and direct mail advertising expenditure on credit cards, unsecured loans and secured loans, 2015/16-2017/18*
- Nielsen Ad Intel coverage
The Consumer – What You Need to Know
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- Two thirds of consumers own a car
- 22% used car finance to buy their last car
- Car dealerships have a stranglehold on distribution of car finance
- Consumers are very confident that they understand their finance deal
- Borrowing for cars is still taboo for many
Car Ownership
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- Two thirds of consumers own a car
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- Figure 30: Car ownership, March 2018
- Used cars are slightly more common than new ones
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- Figure 31: Car acquisition, March 2018
- 38% of those who don’t own a car can drive
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- Figure 32: Car access among non-car owners, March 2018
How People Paid for Last Car Purchase
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- A quarter bought their last car with car finance, but savings are still key
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- Figure 33: How people paid for the last car they bought or leased, March 2018
- Some signs of confusion over car finance arrangements
- Younger drivers and higher earners most likely to use car finance…
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- Figure 34: Use of car finance/lease agreement to fund most recent car purchase, by age and annual household income, March 2018
- …which was used for 44% of new cars bought in the last two years
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- Figure 35: Use of savings and car finance/lease agreement to fund most recent car purchase, by type of car purchase, March 2018
- A fifth used more than one source of funding
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- Figure 36: Number of sources of funding used to purchase last car, March 2018
- HP and PCP dominate the car finance sector
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- Figure 37: Type of car finance used, March 2018
Car Finance Research
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- Just 23% consulted a PCW to research finance options
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- Figure 38: Sources of information used to research most recent car finance product, March 2018
- Recommendations can have a big impact
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- Figure 39: Sources of information used to research most recent car finance product, by age, March 2018
- Half used just one source of information
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- Figure 40: Number of sources of information used to research most recent car finance product, March 2018
Attitudes towards Current Car Finance Product
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- Understanding of terms is strong…
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- Figure 41: Understanding of current car finance product, March 2018
- …but is everyone getting the best deal?
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- Figure 42: Response to the statement “I think that my current car finance contract is the cheapest way I could buy my car”, by socio-economic group, March 2018
- 22% used unsecured credit to pay for a finance deposit…
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- Figure 43: Considerations when arranging last car finance product, March 2018
- …but fewer than one in three considered it to buy their car outright
- Repeat business to drive future growth
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- Figure 44: Response to the statement “I plan to use the same type of car finance that I have now to buy my next car”, by age, March 2018
Attitudes towards Car Finance
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- Borrowing for cars is still taboo for many
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- Figure 45: Attitudes towards car finance, March 2018
- An opportunity to push packaged deals
- Is car ownership on its way out?
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- Figure 46: Agreement with the statement “I would be happy to lease rather than own a car if it meant I could afford a better car”, by age, annual household income, and type of car owned, March 2018
- New car owners have greater affinity for car finance
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- Figure 47: Agreement with attitudes towards car finance, by type of car owned, March 2018
- Open Banking could appeal to some car shoppers
Appendix – Data Sources, Abbreviations and Supporting Information
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- Abbreviations
- Consumer research methodology
Appendix – Market Size and Forecast
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- Figure 48: Forecast of private car finance plans (value) – Best- and worst-case scenarios, 2017-22
- Figure 49: Forecast of private car finance plans (volume) – Best- and worst-case scenarios, 2017-22
- Forecast methodology
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