The new car headlines this year have been dominated by continued declining sales, but car finance records for the first ten months of 2017 show that the sector is still on track for record lending this year.
Latest figures from the Finance & Leasing Association show that the number of private new car finance agreements declined by 7% in October 2017 compared to the same month last year, which is not as bad as the number of private new car sales, which fell by 10% in comparison according to SMMT data. Despite fewer people borrowing, the total amount borrowed went up by 2%, meaning that the average amount borrowed per car increased by approximately 9.5% compared to the same month last year.
More than 86% of all new private car sales are financed at the dealership, with the vast majority of those using a personal contract purchase (PCP) agreement.
Used car finance borrowing continues unabated despite falling sales
Used car finance continues to grow, with October another strong month for dealer-brokered finance. The number of finance agreements was up 9% on the same month last year, and the average lending per car was up 15%. This continues a pattern that has run all year long.
It’s important to remember that despite the used car numbers looking similar or larger to new cars most months, the overall used car market is much larger (about 3-4 times the size of the new car market), so the overall percentage of used cars financed at the dealership is much lower (and not quoted by the FLA).
We won’t know how the finance numbers compare to used car sales until early in the new year, as sales data is only provided by the SMMT on a quarterly basis. The third quarter saw used car sales falling by 2%, and the second quarter saw a modest 0.5% drop.
Assuming that nothing significant changes in the last two months (and so far, there doesn’t seem to be any indication of it), then total lending for 2017 will hit a new record for both new and used car finance markets.
It will be interesting to see if there is any response from the Financial Conduct Authority (FCA) or the Bank of England, given that both institutions are currently investigating the car finance market.