Against market expectations, 6% more new cars and 20% more used cars were sold on finance in January than the year before, according to new statistics from the Finance & Leasing Association, the trade body for the motor finance industry.
Many dealers were offering low and zero percent finance deals on cars in January, helping people to buy new and used cars and reduce the impact of the VAT rise. But this growth needs to be seen against the particularly low level of sales in January 2010 in both the new and used car markets.
Dealer finance is still the most popular way to buy a new car, with 53% of buyers choosing this option in the last 12 months, up 0.9% on last month and the highest penetration rate since June 2009.
Paul Harrison, head of motor finance, said: “New and used car finance sales in January exceeded market expectations. In addition to the flexibility offered by dealer finance, there were good, low-interest rate deals available which contributed to the unexpected growth. January’s figures should, however, be viewed with caution, as the economic outlook in 2011 remains uncertain.
“More and more customers are turning to personal contract purchase1 agreements because of the flexibility this provides. Customers do not have to commit to buying the vehicle outright if they do not want to, and can hand the keys back and walk away once all payments have been made. PCP deals accounted for 60% of the credit advanced for new cars in 2010.”