866-997-4948(US-Canada Toll Free)

Car Finance - UK - May 2017

Published By :

Mintel

Published Date : Jun 2017

Category :

Banking

No. of Pages : N/A

The car finance market has grown at a frenetic pace since the recession, supported by low interest rates and the popularity of affordable Personal Contract Purchase (PCP) products. The shadow of an upcoming FCA investigation into fairness is now looming, and new cars are expected to lose their shine over the next few years. Under-explored opportunities lie in used car finance, online distribution and leasing.

Table of Content

OVERVIEW
What you need to know
Products covered in this report

EXECUTIVE SUMMARY
The market
Strong double-digit growth begins to slow
Figure 1: Value of car finance contracts sold through dealerships (private sector only) – Fan chart, 2011-21
Franchised dealers continue to dominate distribution
Figure 2: Where people buy cars, February 2017
Companies and brands
Car dealerships control two thirds of finance distribution
Figure 3: Car finance providers used, February 2017
Providers target innovation and greater share of the used car segment
The consumer
Savings used more commonly than car finance for last car purchase
Figure 4: How people paid for the last car they bought or leased, February 2017
Hire purchase has proved narrowly more popular than PCP
Figure 5: Car finance types used, February 2017
Three quarters say they researched car finance before buying
Low cost and brand reputation sway purchasing decisions
Figure 6: Approaches to car finance arrangement, February 2017
The majority intend to own the car they are financing at the end of the product
Figure 7: Attitudes towards car finance, February 2017
What we think

ISSUES AND INSIGHTS
Online distribution can threaten dealerships through user experience
The facts
The implications
The temptation of that new car smell
The facts
The implications

THE MARKET – WHAT YOU NEED TO KNOW
Strong double-digit growth begins to slow…
… but not before catching the attention of the FCA
New and used car finance both grew by 12% in value in 2016
Franchised dealers continue to dominate distribution

MARKET SIZE AND FORECAST
Strong double-digit growth begins to slow
Figure 8: Volume and value of car finance contracts sold through dealerships (private sector only), 2010-15
Value and volume growth are expected to weaken further
Figure 9: Value of car finance contracts sold through dealerships (private sector only) – Fan chart, 2011-21
Figure 10: Value of car finance contracts sold through dealerships (private sector only), 2011-21
Figure 11: Volume of car finance contracts sold through dealerships (private sector only) – Fan chart, 2011-21
Figure 12: Volume of car finance contracts sold through dealerships (private sector only), 2011-21
Forecast methodology

MARKET SEGMENTATION
New and used car finance showed double-digit value growth in 2016
Figure 13: Volume and value of private car finance contracts sold via dealerships, segmented by new and used cars, 2010-16
More than four in every five new cars is bought on finance
Figure 14: Proportion of new private car sales bought with a car finance agreement, 2010-16
Figure 15: Proportion of used car sales bought with a car finance agreement, 2010-15
Half of car buyers intend to get a new car
Figure 16: Car purchasing intentions: used or new, February 2017

MARKET DRIVERS
FCA announces investigation into the car finance market…
… and product concerns are key
New and used car sales have continued to grow
Figure 17: New and used car market volumes, 2011-16
Figure 18: UK new and used car sales, by volume, 2011-21
Short-term car buying demand is relatively constant …
Figure 19: Buying/replacing cars, last three months and next three months, June 2012-April2017
… and more than half of people intend to buy a car in the next three years
Figure 20: Car purchasing plans, February 2017
Low interest rates have helped make car finance affordable

CHANNELS TO MARKET
Franchised dealers continue to lead the way
Figure 21: Sales of new and used car volumes, by channel, 2013-16

COMPANIES AND BRANDS – WHAT YOU NEED TO KNOW
Car dealerships control two thirds of finance distribution
Providers target innovation and greater share of the used car segment
PCP is propping up car finance adspend

MARKET SHARE
Car dealerships control two thirds of finance distribution
Figure 22: Car finance providers used, February 2017
Car dealerships: Ford dominates car registrations
Figure 23: Manufacturer shares of new car registrations, 2016
Banks and building societies: Lloyds Banking Group is well-placed for car finance and car loans

COMPETITIVE STRATEGIES
Providers look to innovation for growth
BMW Financial Services to back start-ups
Zopa offers loans targeting PCP balloon payments
Ford broadens financial services offering
Providers invest in used car finance
Carbaya
Raphael Finance

ADVERTISING AND MARKETING ACTIVITY
PCP is propping up car finance adspend
Figure 24: Total above-the line, online display and direct mail advertising expenditure on credit products that can be used for car purchases, by type, 2014/15- 2016/17*
Carfinance247 invests over £2 million in advertising
Figure 25: Carfinance247, London bus advert, May 2017
Figure 26: Total above-the line, online display and direct mail advertising expenditure on car finance products, by top five advertisers, 2016/17*
Car finance adspend is skewed towards digital channels
Figure 27: Total above-the line, online display and direct mail advertising expenditure on credit products that can be used for car purchases, by advertiser, 2016/17*
Banks look to cross-sell from other financial products
Figure 28: Advertising on log-in page of mobile banking app, April 2017
Nielsen Ad Intel coverage

THE CONSUMER – WHAT YOU NEED TO KNOW
Savings more commonly than car finance for last car purchase
Two thirds took car credit from their car dealership
Three quarters say they researched car finance before buying
Low cost and brand reputation sway purchasing decisions
The majority intend to own the car they are financing at the end of the product

CAR OWNERSHIP
Seven in ten people own a car
Figure 29: Car ownership, February 2016-17
People are most likely to have cars bought two years ago or more
Figure 30: Car acquisition, February 2017
More than a third of non-car owners have a license
Figure 31: Car access among non-car owners, February 2017

HOW PEOPLE PAID FOR LAST CAR PURCHASE
Savings were used more commonly than car finance for last car purchase
Secondary sources help boost affordability
Figure 32: How people paid for the last car they bought or leased, by number of sources used, February 2017
Figure 33: Number of sources used for last car bought or leased, February 2017
Hire purchase has proved narrowly more popular than PCP
Figure 34: Car finance types used, February 2017

CAR FINANCE PROVIDERS AND CHANNELS USED
Two thirds took car credit from their car dealership
Figure 35: Car finance providers used, February 2017
Car dealerships have strongest hold with 45+ age group
Figure 36: Car finance providers used, by age, February 2017
One in five arranged their car finance online
Figure 37: Car finance arrangement methods, February 2017
Figure 38: Car finance arrangement methods, by age, February 2017

CAR FINANCE INFORMATION SOURCES
Three quarters say they researched car finance before buying
Figure 39: Car finance information sources, February 2017
Figure 40: Car finance information sources, by age, February 2017

HOW PEOPLE INTEND TO PAY FOR FUTURE CAR PURCHASE
A third of people plan to use car finance to buy a car
Figure 41: Car funding plans, February 2017
Older Millennials show strong potential for future car finance uptake
Figure 42: Car funding plans, February 2017
Existing car owners more likely to take their next car purchase online
Figure 43: Likelihood to purchase next car online, by car ownership, February 2017

APPROACHES TO CAR FINANCE ARRANGEMENT
Low cost and brand reputation sway purchasing decisions
Scope to improve awareness of refinance options
Figure 44: Approaches to car finance arrangement, February 2017
18-44s are more likely to explore their options, but half are trapped by their car choice
Figure 45: Approaches to car finance arrangement, by age, February 2017

ATTITUDES TOWARDS CAR FINANCE
Most intend to own the car they are financing at the end of the product
Opportunities to improve consumer understanding and customer service
Figure 46: Attitudes towards car finance, February 2017
Millennials are more tempted by the promise of new and expensive cars on credit
Figure 47: Attitudes towards car finance, by age, February 2017

APPENDIX – DATA SOURCES, ABBREVIATIONS AND SUPPORTING INFORMATION
Abbreviations
Consumer research methodology

APPENDIX – MARKET SIZE AND FORECAST
Figure 48: Forecast of private car finance plans (value) – Best and worst case scenarios, 2016-21
Figure 49: Forecast of private car finance plans (volume) – Best and worst case scenarios, 2016-21
Forecast Methodology

List of Table

NA

Make an enquiry before buying this Report

Please fill the enquiry form below.

  • Full Name *
  • Your Email *
  • Job Title *
  • Company *
  • Phone No. * (Pls. Affix Country Code)
  • Message
  • Security Code *