Race to beat VAT rise leads to rise in forecourt finance

Motorists buying new cars in November bought 82% more cars using dealer finance than in the same month a year earlier, according to new statistics from the Finance & Leasing Association.

In a race to beat the VAT rise, new car buyers took out motor finance deals worth more than half a billion pounds in November. Overall, in the 12 months to November, 45.8% of all private new car sales were financed through dealerships.

A further indication of new-found consumer confidence was that motor finance providers reported the first growth in the number of used or second-hand cars bought using dealer finance since March 2009.  In November, consumers bought 4% more used cars this way than in the same month a year earlier.

Commenting on November’s motor finance figures, Geraldine Kilkelly, Head of Research and Chief Economist, said: “Today’s figures are encouraging, especially as there was also growth in the used car market. Buying a new car is a sign of consumer confidence, as replacing an older car is usually a discretionary, rather than an essential purchase.

"But the rise of 82% in November needs to be treated with some caution because it compares last November with November 2008, which was the height of the slump in business volumes. In November 2008 22,402 new cars were bought by consumers using dealer finance, which was 40% down on November 2007.

"We expect December’s new car finance figures also to show strong growth as consumers scramble to beat the VAT increase.”