Another month of motor finance growth but will 2010 still be tough on lenders?
The latest motor finance statistics from the Finance & Leasing Association (FLA) show strong demand from consumers for new car finance, but motor finance providers remain cautious about the prospects for 2010 as the UK slowly recovers from recession.
In October the number of new cars bought by consumers using forecourt finance was up 18%, compared with the same time last year (see Table 1 below). Demand for new car finance was particularly weak during the final months of 2008, and car buyers are this year taking advantage of the reduced VAT rate as well as the attractive finance options available in dealerships. The FLA expects new car finance to perform well in the last two months of the year ahead of the return to a higher VAT rate in January.
The consumer used car finance market continues to contract, falling 14% by volume in October compared with the same month a year ago. Overall, in the 12 months to October new and used car finance volumes fell 21% and 13% respectively, compared with the same period in 2008.
Commenting on October’s motor finance figures, Paul Harrison, Head of Motor Finance, said:
“While recent growth in new car finance is welcome, the withdrawal of Government incentives in 2010 – in particular, the 15% VAT rate – will affect demand. The end of the scrappage scheme may also mean a return to more traditional buying behaviour in the new and used car markets.
Wholesale finance remains expensive and we shall be closely monitoring how this impacts on the motor finance market in 2010. We hope to see positive results from the Government’s efforts to improve the wholesale market.”
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