Table of Contents
Executive Summary
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- The market
- The market will continue to grow, at a steady pace, over the next five years
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- Figure 1: Volume of consumer POS car finance contracts – Fan chart, 2014-24
- PCPs will remain the product of choice for consumers, but face growing competition from traditional leasing alternatives
- Used car sector represents the main growth area
- The distribution mix
- New car registrations expected to fall again in 2019
- Regulator publishes final report
- Companies and brands
- A mix of specialists and captive operations serve the market
- Subsidiaries of two high street banks have expertise in the market
- The market continues to attract new entrants
- New innovations cater for rising numbers of people who don’t need to ‘own’ their car
- A lot of specific product advertising occurs below the line
- The consumer
- There are an estimated 38 million car drivers in the UK
- Two in five people obtained their car less than two years ago
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- Figure 2: Length of time ago acquired car, March 2019
- Half of all licence holders would like to buy or lease a car this year
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- Figure 3: Plans to buy or lease a car within the coming year, March 2019
- Many people have experience of acquiring a car on finance
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- Figure 4: Past usage of types of car finance agreement and willingness to use again, March 2019
- One in four prospective finance users would prefer to be pre-approved
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- Figure 5: Preferred method of arranging car finance, March 2019
- 60% will use a price comparison site to find a deal
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- Figure 6: Consumer buying behaviours (prospective car finance users only), March 2019
- What we think
Issues and Insights
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- Pre-approval for credit will drive more deals online
- The facts
- The implications
- Growing appetite for greener cars will drive demand for ‘green’ finance
- The facts
- The implications
The Market – What You Need to Know
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- Consumer car finance market was worth £37 billion in 2018
- PCPs represent the majority of finance deals arranged on the forecourt
- Used car finance is the main growth driver
- The distribution mix is more fragmented in the used car sector
- 2019 is expected to see a further decline in new car registrations
- FCA publishes final report and warns of “conflicts of interest”
Market Size and Forecast
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- Sales of consumer POS finance continue to grow
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- Figure 7: Volume and value of consumer POS car finance contracts, 2013-18
- Outlook: steady growth forecast
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- Figure 8: Forecast of the consumer POS car finance market, by volume and value, 2019-24
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- Figure 9: Volume of consumer POS car finance contracts – Fan chart, 2014-24
- Figure 10: Value of consumer POS car finance contracts sold, at current prices – Fan chart, 2014-24
- Forecast methodology
Market Segmentation
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- Used car segment continues to drive growth
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- Figure 11: Volume and value of consumer POS car finance, by new and used cars, 2014-18
- 91% of new private car sales were funded by dealer finance in 2018
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- Figure 12: Proportion of new private car sales bought with a POS finance agreement, 2014-18
- POS finance also accounts for a growing proportion of used car sales
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- Figure 13: Proportion of used car sales bought with a car finance agreement, 2014-18
- PCPs are currently the preferred choice for both consumers and dealers
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- Figure 14: Proportional distribution of consumer POS car finance advances, by product type, 2018
- Unsecured loans are also available through dealers
Channels to Market
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- Franchised dealers dominate the new car market
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- Figure 15: Channel used to purchase last car, November 2018
- The used car market faces stiffer competition from non-POS suppliers
- The internet is a powerful influencer of buying behaviour
Market Drivers
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- New and used car sales have fallen in the last two years
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- Figure 16: Volume of new car registrations and used car sales via dealers, 2013-18
- Private sales account for a falling proportion of total new registrations
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- Figure 17: Number of new car registrations, by type of customer, 2014-18
- Around one in five cars on the road are financed
- Strong growth in the personal leasing market
- Could PCP providers be losing business to leasing firms?
- Rising motoring costs encourage shift from car ownership to ‘usership’
Regulatory and Legislative Changes
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- FCA set to intervene to address “excessive” motor finance costs
- HMRC alters tax treatment of PCPs
Companies and Brands – What You Need to Know
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- Finance is supplied by a mix of specialists and captive operations
- Subsidiaries of two high street banks have expertise in the market
- Good growth prospects attract new entrants
- New innovations have been developed to cater for ‘usership’
- A lot of specific product advertising occurs below the line
The Main Suppliers
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- Most car manufacturers have in-house finance operations
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- Figure 18: Share of new car registrations, by manufacturer, 2017 and 2018
- Volkswagen Financial Services is the largest supplier of car finance in the UK
- Ford Credit and Vauxhall Finance
- Other large captives
- Santander, Black Horse and Barclays
- Significant others
Competitive Strategies and Innovation
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- Mergers, new entrants and new product launches
- MotoNovo and Aldermore complete integration
- BNP Paribas introduces own car finance offering in the UK
- Admiral launches direct-to-consumer car credit proposition
- Alphera unveils new online account management portal…
- …and introduces an incentive scheme focusing on customer satisfaction
- Other recent arrivals: Fintech start-ups, Oodle and Blue Motor Finance
- Industry Trends
- The rise of subscription services…
- …currently still a niche area, but with good growth potential
- Finance migrating online
Advertising and Marketing Activity
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- Above-the-line adspend on car finance increases, albeit from a very small base
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- Figure 19: Total above-the-line, online display and direct mail advertising expenditure on car finance and personal loan products, 2014-18
- Three online operators accounted for roughly two thirds of adspend in 2018…
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- Figure 20: Top 10 advertisers of car finance products (via above-the-line, online display and direct mail channels only), 2017 and 2018
- …hence, the dominance of digital advertising
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- Figure 21: Share of above-the-line, online display and direct mail advertising expenditure on car finance, by media type, 2018
- Car manufacturers invest millions in advertising
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- Figure 22: Total above-the-line, online display and direct mail advertising expenditure on cars, dealers and related products and services, 2014-18
- Nielsen Ad Intel coverage
The Consumer – What You Need to Know
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- Two in five people obtained their car less than two years ago
- Half of all licence holders would like to get a car this year
- Many people have experience of acquiring a car on finance
- One in four potential borrowers would prefer credit to be pre-approved
- 60% of prospective car finance users are likely to use a price comparison site to find a deal
Licence Holders and Car Ownership
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- 12% of adults aged 17+ have a provisional licence
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- Figure 23: Proportion of adults aged 17+ with a driving licence, March 2019
- Mintel estimates that there are 38 million car drivers in the UK
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- Figure 24: Type of vehicle driven, March 2019
- 83% of drivers are the registered keeper of their vehicle
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- Figure 25: Registered keeper of car driven, March 2019
- People are trading in their cars more regularly
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- Figure 26: Length of time ago acquired car, March 2019
Existing Car – Condition at Purchase and Funding Method
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- Nearly half of all drivers say their existing car was ‘new’ when they got it
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- Figure 27: Condition of car when acquired, March 2019
- Two thirds of drivers used savings or income to fund or part-fund the purchase of their car
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- Figure 28: How paid for car, by condition and length of time ago acquired it, March 2019
- One in four finance users part-exchanged an older car
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- Figure 29: How paid for car, by those who used a loan or finance/lease agreement, March 2019
Car Buying Plans and Expected Method of Finance
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- 50% of licence holders are planning to buy or lease a car within the next 12 months
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- Figure 30: Plans to buy or lease a car within the coming year, March 2019
- New car buyers are likely to opt for another new car
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- Figure 31: Plans to buy or lease a car within the coming year, by condition and length of time ago acquired current car, March 2019
- 27% of prospective car buyers intend to use a loan, finance or lease agreement
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- Figure 32: Expected method of funding acquisition of car, by condition of car planning to get, March 2019
Usage of Car Finance
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- More than half of all drivers have taken out finance to pay for a car
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- Figure 33: Past usage of types of car finance agreement and willingness to use again, March 2019
- Recent growth in PCP and PCH is evident
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- Figure 34: Proportion who have previously used finance type, by drivers who used a loan or finance/leasing agreement to obtain current car, March 2019
Buying Cars on Finance – Consumer Behaviour and Preferences
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- Most consumers still prefer to choose car first before arranging any finance…
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- Figure 35: Preferred method of arranging car finance, March 2019
- …especially the over-65s…
- …but there’s still a large minority who favour getting pre-approved before shopping for a car
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- Figure 36: Preferred method of arranging car finance, by status of car expected to buy in next 12 months, March 2019
- Around half would use an online dealer or broker to search for a car and arrange finance
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- Figure 37: Consumer buying behaviours (prospective car finance users only), March 2019
- 58% would seek advice from friends and family in the process of buying a car
Appendix – Data Sources and Abbreviations
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- Abbreviations
- Consumer research methodology
Appendix – Market Size and Forecast
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- Total market value forecast – best- and worst-case scenarios
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- Figure 38: Forecast of consumer POS car finance advances – best- and worst-case scenarios, 2019-24
- Total market volume forecast – best- and worst-case scenarios
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- Figure 39: Forecast of consumer POS car finance plans – best- and worst-case scenarios, 2019-24
- Forecast methodology
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