New car buyers opt for dealer finance

In the first six months of 2010, more people used dealer finance than personal loans or savings to make a new car purchase. New figures show that 264,377 people used forecourt finance to buy a new car, which was 49.4% of all new cars sold to consumers. The number of new cars bought on finance was up 26% in the first half of 2010.

According to the Finance & Leasing Association, 57% of dealer finance by value was provided through a Personal Contract Purchase (PCP) deal. These deals have become increasingly popular in the recession because of the flexibility offered to customers. Dealers can tailor repayment terms to their customers’ budget and the customer has a choice at the end of the contract on whether to hand the car back, buy it outright or use any equity as a deposit towards their next deal.

Business purchases of new cars were also up, by 15% in Q2 2010 compared with Q2 2009. Businesses have begun to replace old fleets, whose useful life had been extended because of the recession.

Commenting on June’s motor finance figures, Paul Harrison, Head of Motor Finance, said: “The first half of 2010 has been very positive for dealer finance. We do expect consumer demand to reduce in the next few months but November and December is likely to see a pick up in demand as customers rush to buy new cars before the increase in VAT to 20% affects prices.”