Personal Contract Purchase (PCP) agreements grew 54% by value to £432 million in the new car finance market in August, according to the latest Finance & Leasing Association (FLA) figures.
Customers are also using PCP deals to buy used cars too and the second hand market grew 46% by value to £198m in August.
New car finance increased by 20% as a whole in August and used car finance volumes increased by 17% in comparison to the same month last year.
By contrast, hire purchase (HP) grew by 1% in the new car market to £124 million and by 21% to £485 million in the used car market.
FLA members’ penetration of the private new car registrations market was 74.5%, up from 74.1% in July.
Paul Harrison, head of motor finance at the FLA said: “The increase in the proportion of sales using products like personal contact purchase (PCP) shows that many customers are sensibly choosing to finance their purchases in a way which is both affordable and flexible.
“Credit options like PCP are proving popular as customers benefit from fixed monthly repayments and can decide at the end of the deal if they wish to own or return the car.
“These finance deals are secured against the car itself which means greater protection for consumers and lenders.”