New and used cars being bought with dealer finance fell by 6% in June, the smallest drop since September 2008.

However, according to the Finance and Leasing Association which revealed the results, more financial stimulus and a long-term plan from the Government are both needed for lenders to meet demand when the economy recovers.

Motor finance business was down significantly in the first half of 2009 compared with 2008. During that period, the number of private new and used cars purchased using dealer finance fell by 23% and 10% respectively.

The business car finance market also struggled. Finance provided to businesses for new cars fell in the six month period to June by more than a third compared with the same period in 2008. Business confidence remains low with companies delaying investment not least because of the availability and cost of credit.

Geraldine Kilkelly, head of research and chief economist at the FLA, said: “We have seen the smallest drop in motor finance since September 2008, but motor finance providers are still very concerned about the lack of well-priced funding on the wholesale markets.

“While most lenders are able to meet demand at the current reduced levels, if demand increases in the second half of the year the availability of credit for car buyers may become an issue. The Government needs to prepare for a sustainable recovery by ensuring that the car finance industry has the capacity to meet future demand.”

For full finance analysis see AM’s August 28 issue.

• To download the FLA’s full table on vehicles bought by finance by consumers through dealerships click here.
• To download the FLA’s full table on vehicles bought by businesses with finance through dealerships click here.