CAR FINANCE - UK - JUNE 2019

CAR FINANCE - UK - JUNE 2019

May 2019 Mintel BankingN/A Price :
$ 2553

The focus of this report is on car finance products sold to consumers, as opposed to business customers.

Mintel draws on data provided by the Finance & Leasing Association to show the volume and value of consumer POS (point-of-sale) car finance. This covers PCPs, HP/conditional sale plans, lease agreements and car loans sold to consumers through dealerships. Some FLA members may also include business written through third parties, such as online dealers and brokers. For further information, please see www.fla.org.uk.

"The consumer car finance market will continue to expand, with the used car segment driving this growth. The majority of new business will still be generated at the point of sale, via dealers and other retail outlets. However, digital channels will steadily increase their share of the market, albeit from a small base currently."

Table of contents
OVERVIEW
What you need to know
Report coverage and product definitions
EXECUTIVE SUMMARY
The market
The market will continue to grow, at a steady pace, over the next five years
Figure 1: Volume of consumer POS car finance contracts – Fan chart, 2014-24
PCPs will remain the product of choice for consumers, but face growing competition from traditional leasing alternatives
Used car sector represents the main growth area
The distribution mix
New car registrations expected to fall again in 2019
Regulator publishes final report
Companies and brands
A mix of specialists and captive operations serve the market
Subsidiaries of two high street banks have expertise in the market
The market continues to attract new entrants
New innovations cater for rising numbers of people who don’t need to ‘own’ their car
A lot of specific product advertising occurs below the line
The consumer
There are an estimated 38 million car drivers in the UK
Two in five people obtained their car less than two years ago
Figure 2: Length of time ago acquired car, March 2019
Half of all licence holders would like to buy or lease a car this year
Figure 3: Plans to buy or lease a car within the coming year, March 2019
Many people have experience of acquiring a car on finance
Figure 4: Past usage of types of car finance agreement and willingness to use again, March 2019
One in four prospective finance users would prefer to be pre-approved
Figure 5: Preferred method of arranging car finance, March 2019
60% will use a price comparison site to find a deal
Figure 6: Consumer buying behaviours (prospective car finance users only), March 2019
What we think
ISSUES AND INSIGHTS
Pre-approval for credit will drive more deals online
The facts
The implications
Growing appetite for greener cars will drive demand for ‘green’ finance
The facts
The implications
THE MARKET – WHAT YOU NEED TO KNOW
Consumer car finance market was worth £37 billion in 2018
PCPs represent the majority of finance deals arranged on the forecourt
Used car finance is the main growth driver
The distribution mix is more fragmented in the used car sector
2019 is expected to see a further decline in new car registrations
FCA publishes final report and warns of “conflicts of interest”
MARKET SIZE AND FORECAST
Sales of consumer POS finance continue to grow
Figure 7: Volume and value of consumer POS car finance contracts, 2013-18
Outlook: steady growth forecast
Figure 8: Forecast of the consumer POS car finance market, by volume and value, 2019-24
Figure 9: Volume of consumer POS car finance contracts – Fan chart, 2014-24
Figure 10: Value of consumer POS car finance contracts sold, at current prices – Fan chart, 2014-24
Forecast methodology
MARKET SEGMENTATION
Used car segment continues to drive growth
Figure 11: Volume and value of consumer POS car finance, by new and used cars, 2014-18
91% of new private car sales were funded by dealer finance in 2018
Figure 12: Proportion of new private car sales bought with a POS finance agreement, 2014-18
POS finance also accounts for a growing proportion of used car sales
Figure 13: Proportion of used car sales bought with a car finance agreement, 2014-18
PCPs are currently the preferred choice for both consumers and dealers
Figure 14: Proportional distribution of consumer POS car finance advances, by product type, 2018
Unsecured loans are also available through dealers
CHANNELS TO MARKET
Franchised dealers dominate the new car market
Figure 15: Channel used to purchase last car, November 2018
The used car market faces stiffer competition from non-POS suppliers
The internet is a powerful influencer of buying behaviour
MARKET DRIVERS
New and used car sales have fallen in the last two years
Figure 16: Volume of new car registrations and used car sales via dealers, 2013-18
Private sales account for a falling proportion of total new registrations
Figure 17: Number of new car registrations, by type of customer, 2014-18
Around one in five cars on the road are financed
Strong growth in the personal leasing market
Could PCP providers be losing business to leasing firms?
Rising motoring costs encourage shift from car ownership to ‘usership’
REGULATORY AND LEGISLATIVE CHANGES
FCA set to intervene to address “excessive” motor finance costs
HMRC alters tax treatment of PCPs
COMPANIES AND BRANDS – WHAT YOU NEED TO KNOW
Finance is supplied by a mix of specialists and captive operations
Subsidiaries of two high street banks have expertise in the market
Good growth prospects attract new entrants
New innovations have been developed to cater for ‘usership’
A lot of specific product advertising occurs below the line
THE MAIN SUPPLIERS
Most car manufacturers have in-house finance operations
Figure 18: Share of new car registrations, by manufacturer, 2017 and 2018
Volkswagen Financial Services is the largest supplier of car finance in the UK
Ford Credit and Vauxhall Finance
Other large captives
Santander, Black Horse and Barclays
Significant others
COMPETITIVE STRATEGIES AND INNOVATION
Mergers, new entrants and new product launches
MotoNovo and Aldermore complete integration
BNP Paribas introduces own car finance offering in the UK
Admiral launches direct-to-consumer car credit proposition
Alphera unveils new online account management portal…
…and introduces an incentive scheme focusing on customer satisfaction
Other recent arrivals: Fintech start-ups, Oodle and Blue Motor Finance
Industry Trends
The rise of subscription services…
…currently still a niche area, but with good growth potential
Finance migrating online
ADVERTISING AND MARKETING ACTIVITY
Above-the-line adspend on car finance increases, albeit from a very small base
Figure 19: Total above-the-line, online display and direct mail advertising expenditure on car finance and personal loan products, 2014-18
Three online operators accounted for roughly two thirds of adspend in 2018…
Figure 20: Top 10 advertisers of car finance products (via above-the-line, online display and direct mail channels only), 2017 and 2018
…hence, the dominance of digital advertising
Figure 21: Share of above-the-line, online display and direct mail advertising expenditure on car finance, by media type, 2018
Car manufacturers invest millions in advertising
Figure 22: Total above-the-line, online display and direct mail advertising expenditure on cars, dealers and related products and services, 2014-18
Nielsen Ad Intel coverage
THE CONSUMER – WHAT YOU NEED TO KNOW
Two in five people obtained their car less than two years ago
Half of all licence holders would like to get a car this year
Many people have experience of acquiring a car on finance
One in four potential borrowers would prefer credit to be pre-approved
60% of prospective car finance users are likely to use a price comparison site to find a deal
LICENCE HOLDERS AND CAR OWNERSHIP
12% of adults aged 17+ have a provisional licence
Figure 23: Proportion of adults aged 17+ with a driving licence, March 2019
Mintel estimates that there are 38 million car drivers in the UK
Figure 24: Type of vehicle driven, March 2019
83% of drivers are the registered keeper of their vehicle
Figure 25: Registered keeper of car driven, March 2019
People are trading in their cars more regularly
Figure 26: Length of time ago acquired car, March 2019
EXISTING CAR – CONDITION AT PURCHASE AND FUNDING METHOD
Nearly half of all drivers say their existing car was ‘new’ when they got it
Figure 27: Condition of car when acquired, March 2019
Two thirds of drivers used savings or income to fund or part-fund the purchase of their car
Figure 28: How paid for car, by condition and length of time ago acquired it, March 2019
One in four finance users part-exchanged an older car
Figure 29: How paid for car, by those who used a loan or finance/lease agreement, March 2019
CAR BUYING PLANS AND EXPECTED METHOD OF FINANCE
50% of licence holders are planning to buy or lease a car within the next 12 months
Figure 30: Plans to buy or lease a car within the coming year, March 2019
New car buyers are likely to opt for another new car
Figure 31: Plans to buy or lease a car within the coming year, by condition and length of time ago acquired current car, March 2019
27% of prospective car buyers intend to use a loan, finance or lease agreement
Figure 32: Expected method of funding acquisition of car, by condition of car planning to get, March 2019
USAGE OF CAR FINANCE
More than half of all drivers have taken out finance to pay for a car
Figure 33: Past usage of types of car finance agreement and willingness to use again, March 2019
Recent growth in PCP and PCH is evident
Figure 34: Proportion who have previously used finance type, by drivers who used a loan or finance/leasing agreement to obtain current car, March 2019
BUYING CARS ON FINANCE – CONSUMER BEHAVIOUR AND PREFERENCES
Most consumers still prefer to choose car first before arranging any finance…
Figure 35: Preferred method of arranging car finance, March 2019
…especially the over-65s…
…but there’s still a large minority who favour getting pre-approved before shopping for a car
Figure 36: Preferred method of arranging car finance, by status of car expected to buy in next 12 months, March 2019
Around half would use an online dealer or broker to search for a car and arrange finance
Figure 37: Consumer buying behaviours (prospective car finance users only), March 2019
58% would seek advice from friends and family in the process of buying a car
APPENDIX – DATA SOURCES AND ABBREVIATIONS
Abbreviations
Consumer research methodology
APPENDIX – MARKET SIZE AND FORECAST
Total market value forecast – best- and worst-case scenarios
Figure 38: Forecast of consumer POS car finance advances – best- and worst-case scenarios, 2019-24
Total market volume forecast – best- and worst-case scenarios
Figure 39: Forecast of consumer POS car finance plans – best- and worst-case scenarios, 2019-24
Forecast methodology

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