Used car finance volumes grew by 8% as automotive supply issues left new car volumes 7% down in 2022, new data from the Finance and Leasing Association (FLA) has revealed.

Motor finance businesses are “optimistic about the prospects for growth” in 2023, however, with 52% of providers having told the FLA that they expect some increase in new business over the next year – up from 23% in Q4 2022.

New consumer car finance business declined 6% year-on-year by both value and volume in December 2022 to leave the sector up 9% by value (to £40.7 billion) and 3% by volume (to 2.2 million units) for the year as a whole.

The new car finance market declined 7% by value (to £1.14bn) and 16% by volume (to 41,410 units) year-on-year, leaving the sector down 1% by value (to £7.2bn) and 7% by volume (to 684,129 units).

In the used sector, December brought a 4% decline in the value of car finance (to £1.29bn) as volumes declined 1% year-on-year to 86,665 units.

Despite used car retailers’ stocking challenges in 2022, however, the value of car finance business grew 18% to £23.5bn as volumes grew 8% to 1.53bn units compared to 2021.

Geraldine Kilkelly, director of research and chief economist at the FLA, said: “The consumer car finance market showed signs of softer demand in the final quarter of 2022. Despite the challenges faced by the industry from shortages of supply during 2022, the value of new business provided by this market reached a record level of £40.7 billion in 2022, supported by higher underlying asset values.

“While the near-term outlook remains challenging, the UK avoided recession in Q4 2022, inflationary pressures have shown signs of easing, and the labour market remains robust.

“The FLA’s Q1 2023 Industry Outlook Survey suggested that motor finance providers are more optimistic about the prospects for growth, with 52% expecting some increase in new business over the next year, up from 23% in Q4 2022.

Commenting on the FLA’s 2022 motor finance sector data, Michael Davidson, the chief revenue officer at Freedom Finance, highlighted the issues associated to the cost-of-living crisis.

And he urged motorists to shop around for the best finance deal to avoid unnecessary credits checks and rejections.

Davidson said: “It also helps to widen access to the credit market as research from the FCA shows that millions of people are deterred from applying for loan products because they are afraid of being rejected – nearly half (46%) of those put off from applying for credit said that they were afraid of the impact on their credit score or because they felt there was no point in applying.”

Kilkelly said: “As always, customers who are worried about meeting payments should speak to their lender as soon as possible to find a solution.”