The Finance and Leasing Association says consumer demand for new car finance is on the increase.
However, the number of new cars purchased via finance agreements fell dramatically in 2000.
A total of 7% more cars were financed through motor dealers in the final quarter of 2000 compared to the same period the previous year - but overall in 2000 the number of purchases via finance agreements fell by 8%. The size of the average loan decreased on 1999 by 1% from £8,889 to £8,841.
In the used car market there was an 18% fall in the final quarter and a 15% drop in 2000 compared to 1999. Average loan size for a used car decreased by 2% from £6,645 to £6,527.
Martin Hall, director general of the Finance & Leasing Association, said: "Lower new car prices and competitive deals are at last attracting consumers back to the marketplace. "The overall fall in dealer finance last year in part reflects increased competition from other credit products such as direct personal loans , now often pitched at car purchases.
"The savings ratio is at its lowest for many years - maybe there are more people paying cash."