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Finance analysis: Dealers’ POS push hits the 50% mark

The campaign to win back lost point-of-sale finance has achieved an important psychological victory – 50% of purchases of new cars were financed that way in the year to June.


Data from the Finance and Leasing Association indicates that showroom financing was up from 46.2% in the 12 months to June 2007.

Paul Harrison, FLA head of motor finance, said: “These statistics show that consumers are increasingly taking advantage of the benefits provided by dealer finance – namely the flexibility and choice of products.”

The FLA believes one of the few positive aspects of the economic downturn for dealers is that retail car buyers are finding it more difficult to find credit elsewhere.

This is because finance agreements are usually secured against the car. This enables specialist motor finance providers to offer more flexible terms and a wider range of products in showrooms.

Hire purchase remains the most popular form of finance in dealerships but FLA figures show that both leasing (up 27%) and personal contract purchase (PCP – 18% higher) were also popular in the year to June.

The FLA hopes its website, with its guide to car finance options, will help to encourage consumers into showrooms during 58-plate month.

One feature is a ‘finance decider’ tool to advise people on which product best suits their circumstances.

But competition will be intense. The Uswitch web-site issued a statement saying retail buyers were this month set to “throw away” £168 million.

It urged them to seek personal loans rather than “costly finance deals” in dealerships.

That plays on the common public percetion that high street finance is cheaper, but ignores dealers’ argument of greater convenience on point-of-sale finance arrangements.

Harrison said: “Uswitch does not compare dealer finance with personal loans on a like-for-like basis.

The interest savings Uswitch quotes are based on a ‘best buy’ loan but only an ‘average’ dealer agreement.

The website also fails to take into account how conditions have impacted on the availability of credit for consumers.”

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