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Over 50% of car buyers using finance sell before finance term comes to an end

car purchase

New analysis from Experian, the global information services company, has revealed that of all the new and used cars bought through a motor finance deal during 2012, 54% cent changed registered keeper before the term was due to end.

In comparison during 2009, only 35% of motorists changed their cars before the end of the finance agreement and the figure stood at only 28% in 2007.

These figures show that motorists are opting to change their vehicles increasingly early, indicating that they are either seeking to rearrange their finances or are being attracted by an upgrade or the desire to change to something better suited to their current needs.

Experian’s analysis of over 87,000 hire purchase (HP) and personal contract plan (PCP) motor finance agreements across the UK revealed that during 2012, a keeper change occurred on average nearly 13 months before the original finance term was due to end.

The analysis also revealed that motorists buying used cars were likely to change much sooner – on average 18 months before the finance agreement was due to end, compared to new car owners who changed vehicles seven months before the end of the finance agreement.

In comparison during 2009, a keeper change on a new vehicle occurred on average five months after the end of the agreement and only one month before the agreement was due to end on used cars. During 2007, motorists were even more likely to hold onto their cars for longer with new car owners changing 13 months after the end of the finance agreement and used car owners changing after seven months.

The vehicle types that were more likely to be changed before the end of the car loan in 2012 were luxury vehicles such as the Mercedes S Class.  This was followed by upper medium cars (such as the Ford Focus) and MPVs (such as Vauxhall Zafira).  The vehicles types that consumers were most likely to hold onto were basic models and executive models (such as the Mercedes C Class).  

The analysis also found that despite the fact that consumers were opting to change their vehicles sooner, longer agreement terms were still the most popular, with over 80 per cent of motorists opting for average car loan terms of 26 months or more.

In addition, although hire purchase remains by far the most popular option, comprising of 86% of agreements in 2012, there has been a slight shift towards personal contract plans which are up from 6.12% in 2007 to 13.69% in 2012.

Andrew Ballard, principle consultant at Experian’s automotive business, said: “This analysis shows a significant shift in the way people are choosing to manage their finance agreements.

"The preference towards longer terms and the increase in PCP agreements suggests consumers have a need to keep initial outlay and regular motoring costs low.

“However, shorter length of ownership suggests that they are either considering their own finances and ability to keep paying or are swayed by the wealth of subsidised finance deals and incentives available to upgrade or change to something new.  Either way, regular customer contact will enable dealers to better understand customer’s needs and changing circumstances, allowing the right deals to be offered to the right customers at the right time.”

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