Dealers are starting to win back point-of-sale finance revenue after years of decline because car buyers are finding it harder to get loans from direct lenders.

There was a 6% year-on-year increase in the 12 months to April to £12 billion, up from £11.3bn in April 2007, says the Finance & Leasing Association.

Point-of-sale funding now supports 49% of sales of new cars, up from 47%.

Paul Harrison, FLA head of motor finance, said: “Our members have equipped dealers with a wide range of products available only in showrooms to help consumers cope with current conditions. Point-of-sale products will prove invaluable for individuals and businesses in the months ahead.”

Doug Moody, FLA motor finance division chairman and a director of Mercedes-Benz Financial Services, said: “Point-of-sale finance has become more competitive over the past year, with secured finance enabling customers to enjoy more competitive terms than other forms of lending.”

Moody said one reason for the increase was finance products offering guarantees such as future values of vehicles that were not available elsewhere.

Dealers could also put together finance packages to meet all budgets.

“It is clear why consumers are increasingly switched-on to the benefits of point-of-sale finance,” he said.

But dealers will have to be wary of how they sell PPI and other insurances following the Competition Commission report.

The Financial Services Authority (FSA) has fined several banks, insurance companies and brokers for mis-selling PPI.

The British Bankers’ Association challenged the commission’s finding that PPI policies were too expensive.

Citizens Advice Bureau, which has described sale of PPI as a “protection racket”, disagreed. Policy director Teresa Perchard said the report confirmed its view that PPI was over expensive and often unsuitable.

“Lenders are ripping off, rather than looking after their customers,” she said.

Nick Starling, director of general insurance and health at the Association of British Insurers, acknowledged PPI problems but said changes needed time to bed in.

“The commission’s proposed remedies could destroy this market while facing economic uncertainty,” he said.

“It would be disastrous to leave many people unprotected to deal with unforeseen financial crisis. The market is changing and therefore should not be judged retrospectively.”