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Finance providers expect car registrations to 'slip into neutral' this year

The majority of the UK’s largest motor finance brokers expect new car registrations will slip into neutral over the course of 2016.

Whilst car buyer confidence remains high – unchanged at 7.1 out of a possible 10 on the previous quarter – almost three quarters of brokers (72%) feel that a levelling off in new car sales is on the cards, according to the latest Paragon Car Finance Headlight Survey.

One quarter (24%) of brokers surveyed continue to see scope for a further increase in sales in 2016, with only a small minority (4%) expecting registrations to drop.

Low interest rates (80%), continued economic growth (60%) and manufacturer support (60%) are highlighted as the most important factors supporting sales.

Brokers also say the biggest potential threat to buoyancy comes from the possibility of an interest rate rise (52%), alongside the risk of an over-supply of new cars into the UK market (29%).

Julian Rance, head of Paragon Car Finance said: “After several years of strong growth, the broker community is clearly expecting to see a gradual cooling off in the rate of new car sales growth.

“Encouragingly, car buyer confidence remains high and with expectations that UK interest rates will now stay lower for longer, we should continue to see healthy levels of activity across the new and used car market in the UK for the foreseeable future.”

Used cars

Whilst almost half of motor finance brokers expect used car prices to hold

steady over the next six months (48%), four out of 10 (43%) are expecting

prices to fall as the supply of used cars grows and customers exert pressure to achieve a better deal.

However, no one is expecting to see a massive drop in used car prices with those anticipating a fall expecting prices to fall a little.

Ownership

Over half of all brokers report that customers now look to replace their car at least once in every two to three years.

This has risen steadily since the survey began, climbing from 48% initially to 55% in the latest round of questioning.

At the same time those reporting that customers retain their car for three to four years has dropped from 39% to 32%.

Brokers’ 2016 wish list

Motor finance brokers highlighted three key factors.

Top of the list, brokers want interest rate stability.

More than two-thirds of respondents (67%) chose stable interest rates indicating just how important a steady interest rate outlook has become for car buyers.

Next, four out of 10 brokers (39%) want a straightforward model, standardised across all lenders, to use when assessing the affordability of finance for their customers.

Finally, almost one third of brokers (29%) would like to see more finance options for sub-prime customers.

Whilst product availability and choice for customers with standard credit profiles and a solid credit history have improved massively since the crisis, the same is not yet true for the less standard customer.

> The Paragon Car Finance Headlight Survey is a quarterly survey of the UK’s top 30 vehicle finance brokers operating in the UK.

> View the survey results



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