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Car finance sector expects a ‘stable 2018’, says FLA

Adrian Dally, FLA head of motor finance

The Finance and Leasing Association’s head of motor finance Adrian Dally has said that lenders expect a “stable” 2018 after full-year results from 2017 revealed new business had grown 2% by value despite being down 7% by volume.

Dally (pictured), told AM that the finance market was “like a swan, swimming on fairly calm waters as the battle for sales was fought underwater”, claiming that the year ahead promised growth in used car contracts despite the challenges faced by car retailers.

Dally said: “Of course, finance is a secondary product and volumes will track the metal, but we do expect growth to come from the used sector.

“The SMMT has said that there will be a modest, single figure, decline in new car sales, so we are anticipating a stable year economically.”

Dally said that reports this week that interest rates could rise sooner than expected in the UK would not affect a motor finance market now isolated from the immediate impact of such changes by long-term, fixed rate agreements and PCP offers which guarantee consumers lower monthly payments than the HP alternatives of old.

The FLA reported that the point-of-sale (POS) consumer new car finance market recorded new business down 9% by value (to £1.1 billion) and 15% by volume (to 54,589) in December compared with the same month in 2016.

In 2017 as a whole, new business increased 2% by value (to £18.8 billion) and fell 7% by volume (to 990,029).

The percentage of private new car sales financed by FLA members through the POS was 88.1% in 2017, compared with 88.2% in 2016.

The POS consumer used car finance market reported new business growth in December of 8% ( to £971 million) by value and 3% by volume. In 2017 as a whole, new business grew 12% by value and 6% (to 81,488) by volume.

Geraldine Kilkelly, head of research and chief economist at the FLA, said: “New business volumes in the POS consumer car finance market reached 2.3 million in 2017 – a similar level to 2016. The market expects broadly stable new business volumes in 2018.

“Trends in the new car finance market in the first half of 2018 are likely to be affected by the pattern of demand over the same period last year, when car purchases were brought forward into the first quarter prior to vehicle excise duty changes introduced in April.”

In the business sector of the motor finance market, new car purchases funded by FLA members declined 11% by volume in December and 2% by volume across the whole of 2017.

Businesses showed a preference towards used cars, with volumes rising 20% over the course of 2017 despite a fall of 26% in December alone, but volumes remained comparably small, as the table below reveals.

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