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POS finance is hit by recession

Automotive finance sector leaders are continuing to press the Government for more support because the latest data shows a decline in point of sale revenue. 

Discussions are said to have reached a critical point.
Finance and Leasing Association (FLA) statistics for February show there was a 21% year-on-year dip in both new and used cars bought with dealer finance. 

There was also a 36% fall by value in consumer leasing of new cars – arrangements where people pay a monthly fee for use of the vehicle, servicing and maintenance.

But there was a 3% rise in the value of manufacturers’ personal contract purchase (PCP) commitments in the same month, indicating their attraction as consumers hunt bargains.

Carmakers continue to focus their marketing on a small number of models and derivatives, which they say is the best way to get buyers to commit. Dealers like the way PCPs increase showroom traffic, but some say they should benefit better financially.

These new figures (see table below) show for the first time the impact of the recession on specialist motor finance providers and their dealer partners. 

The one positive fact, said the FLA, is that dealer finance remains the most popular way to fund a new car. In the year to February 52.9% of customers (462,000 vehicles) chose point of sale loans.

Geraldine Kilkelly, FLA head of research and chief economist, said: “The demand for PCP deals indicates that consumers are seeking flexible finance agreements during the economic downturn.”

Kilkelly said action was needed to enable finance providers to meet consumer demand going unmet due to funding
problems.

Volume of new and used retail cars 09

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