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Viewing report
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Motor Finance Market Assessment 2011
Key Note Publications Ltd, Jan 2011
This report provides an overview and analysis of the motor finance market in the UK and focuses on car purchases by private buyers. The report covers motor finance in the new and used car markets and also looks at the main types of finance available to car buyers, including personal loans, hire purchase (HP) and personal contract plans (PCPs). The main suppliers of motor finance in the UK include finance companies, vehicle manufacturers and subprime lenders.
The motor industry in the UK has been seriously affected by the economic downturn, which has resulted in falling numbers of new car registrations and lower levels of used cars sales. This downturn has in turn affected demand for motor finance and resulted in difficult trading conditions for many of the leading suppliers of such financial services. Although used car sales volumes generally exceed new car registration numbers, the market for motor finance is far more heavily dependent on the new car market, with up to half of new car registration purchases being financed in this way.
The European Consumer Credit Directive, which is to come into force on 1st February 2011, will affect all credit agreements and will have a significant impact on the activities of motor finance companies. For example, any advertising which includes information about finance will need to contain additional information. Lenders will also need to provide more comprehensive pre-contract information and they will be required to thoroughly check a consumer’s creditworthiness before entering into an agreement. The Directive is aimed at strengthening existing legislation, such as the Consumer Credit Act.
Exclusive primary research undertaken for this report into consumer attitudes towards motor finance indicated that a significant proportion of consumers expected that obtaining finance to purchase a car would remain difficult because of the credit crisis. The survey also found that a high percentage of consumers would defer buying a new car because of the current economic situation.
The authors forecast that the value of new motor finance in the UK will remain under pressure in 2011, in line with the forecast falls in new car sales over the same year. Consumer concerns regarding the impact on jobs following the spending cuts outlined by the Coalition Government are also expected to have a detrimental impact on sales. In the longer-term, however, the anticipated economic recovery in the UK should boost consumer confidence and expenditure and contribute to an upturn in sales of motor vehicles and motor finance.
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