Car finance borrowing results for April show that car buyers are continuing to borrow more money on their cars, although the number of loan agreements fell in line with car sales.
Latest figures published today by the Finance & Leasing Association (FLA) show that the number of new car finance agreements for consumers fell by 28% in April compared to last year, which is in line with the fall of 28.4% in private new car sales for the same month. 61,434 new cars were financed, with a combined finance value of more than £1.1bn.
However, the value of those agreements continues to increase, continuing a trend that has been tracking for well over a year now. While the number of agreements fell by 28%, the total amount financed only fell by 19%. Although not shown in the table below, this represents a 12% increase in the amount of money borrowed per car. According to my very quick maths, average borrowing is up from just under £17,000 to just over £19,000.
Used cars showed a similar pattern, with volumes down but values up. Used car sales numbers for April have not yet been published, but the FLA results show that the number of used car finance agreements fell by 1% while the value of those agreements increased by 4%. This means that the average amount financed increased from £10,500 to £11,000
Interestingly, the combination of a weaker new car market and stable used car sales numbers meant that more money was spent financing used cars than new cars in April. Year-to-date figures still show significantly more money being financed on new cars, however.
Levels of car finance borrowing an ongoing concern
The increasing amount of car finance borrowing is an ongoing concern for UK financial authorities, with both the Bank of England and the Financial Conduct Authority currently investigating the sector.
About £41bn was lent by FLA members to consumers for purchasing new and used cars in 2016. There are concerns about both the size of that market and the way finance products are being sold in dealerships.
The most popular finance product for personal car buyers, especially for new cars, is the personal contract purchase (PCP). The Financial Conduct Authority is particularly interested in how PCPs are being sold, and whether dealers are following requirements in how these products are being presented and explained to customers.