The Finance and Leasing Association (FLA) still expects car buying activity to pick up in the second quarter, despite expectations that spending will slow amid rising inflation, interest rates interest and taxes.
The FLA revealed that consumer car finance new business volumes fell 1% year-on-year in April (to 596,135 units), with the value of new business rising 12% (to £11.14 billion). sterling) over the same period.
As a result, total new business volumes increased by 15% in the first four months of 2022 compared to the same period of 2021, which included car showroom closures locked down due to COVID-19.
Geraldine Kilkelly, Director of Research and Chief Economist of the FLA, said: “The consumer auto finance market continues to be affected by the global disruption in vehicle supply.
“The market saw further double-digit growth in new business value reflecting upward pressure on car prices, particularly in the used car market.”
Despite growing market pressures – and the freedom of car retailers from COVID-19 restrictions in the second half of 2021 – Kilkelly still forecasts year-over-year growth in the car finance sector in the second half of 2022.
She said: “Consumer spending is expected to slow as pressure mounts on household incomes from rising inflation, interest rates and taxes.
“Our latest research suggests new consumer auto finance business by value will grow 11% in the first half of 2022 and 5% in the second half.
“As always, customers who are concerned about meeting payments should speak to their lender as soon as possible to find a resolution.”
Kilkelly’s comments come a month after the FLA said squeezing household incomes and continued supply constraints on new cars would mean the UK car finance sector was likely to be limited to ‘single-digit growth’. in 2022.
April market data from the FLA showed new consumer car financing generated a 4% increase in new business in value and 1% in volume compared to the same month in 2021.
In the first four months of 2022, new business volumes in this market were 5% higher than in the same period of 2021.
The consumer used-car finance market saw new activity up 17% in value but down 2% in volume in April from the same month in 2021.
Last week, Cap HPI valuations director Derren Martin told AM that tight supplies — and sales volumes — were keeping used-car margins strong, preventing what could otherwise be a “bath of blood” for the sector.
AM magazine of the last month provided an overview of automotive finance market trends and sought to offer advice on how retailers can remain competitive in a business environment hampered by rising interest rates.