Motorists turn to dealer finance in economic downturn

The latest statistics released by the Finance and Leasing Association show that the number of people buying cars on finance dropped significantly in the last three months of 2008.

In Q4 2008, the number of cars bought on finance by consumers through dealerships was 19 per cent down on Q4 2007.

Consumers purchased 27% fewer new cars and 13% fewer used cars with dealer finance in Q4 2008.

For 2008 as a whole, the number of new cars used cars bought on finance by consumers contracted by 3% and 2% respectively.

53.2% of private new car sales were bought using dealer finance in 2008. This is equivalent to almost 475,000 vehicles.

Geraldine Kilkelly, Head of Research and Chief Economist at the FLA, said: “The downturn in the motor market has been well-documented in recent months. Despite the fall in the final quarter of the year, dealer finance has actually become a more popular way to finance car purchases. The percentage of private new car sales bought using dealer finance increased from 47% in 2007 to 53.2% in 2008.”

Stephen Sklaroff, Director General of the FLA, added: “If motor finance companies are to continue to be a key source of credit for consumers, they need to be able to access government support which is already in place for some parts of the financial sector.”