The cost-of-living crisis is pushing new and used car buyers to opt for finance rather than cash purchases, research by What Car? has found.
As part of its weekly industry research, What Car? surveyed 1,060 in-market buyers. Of those buying via finance, a quarter (25.8%) said the cost-of-living crisis had influenced their decision to borrow – helping spread out the cost of purchase – while 74.2% were always expecting to buy via finance.
Personal Contract Purchase (PCP) and Hire Purchase (HP) plans are most popular among finance buyers, accounting for nearly two-thirds (63.4%) of those buying via finance, while a quarter were undecided. PCP and bank loans accounted for 9.5% of planned purchases.
Of all the in-market buyers taking part in the study, 34.7% were looking to purchase in the next four weeks, while 24.3% had plans to buy within one to three months. Nearly a fifth (19.8%) of all buyers were looking to buy a fully electric vehicle (EV).
Steve Huntingford, editor at What Car?, said: “The cost of living crisis is clearly influencing buying decisions, and is already impacting whether people buy via cash or finance.
“Finance helps spread out the purchase cost over several months and, depending on the deal, buyers can simply hand the car back at the end of the contract and swap for a different model, adding flexibility and reducing commitments.”
The used car sector delivered double-digit growth in the value of new consumer finance business generated in July 2022 as supply issues continued to subdue new car registrations.
Motor finance providers are likely to tighten the criteria on which they base their lending, in order to minimise their risks during the cost-of-living crisis.
AM is hosting a webinar for law firm Freeths tomorrow to give UK motor retailers insights into how they must prepare for the Consumer Duty, the new regime from the Financial Conduct Authority.