Used car buyers are paying higher deposits on their motor finance deals to combat rising prices, according to new data from iVendi.
The motor retailing software provider says that the average deposit processed through its platform has increased by 58% since January 2020, but the average loan amount paid out over the same time period has risen by just 14%. The average repayment period is unchanged.
James Tew (pictured), iVendi CEO, said: “We are living through a time when, because of falling stock supply and consistently high demand, used car prices are rising every month by amounts that are probably unparalleled in living memory. It is a very unusual market.
“This raises important questions about how customers are coping with these price increases from a motor finance point of view and our analysis provides some answers at a fundamental level.
“There has been a possibility that car buyers have been stretching themselves to make purchases and affordability may be becoming an issue but our figures suggest that is probably not the case. The amount they are borrowing, while higher, is only up 14%.
“Instead, the real shift is in the deposit where customers are finding, perhaps from money saved up during the pandemic, 58% more on average to fund the vehicle that they want. The financial emphasis of higher prices is being frontloaded.”
Data from iVendi suggests that motor finance companies are approving an increasing proportion of online applications. The number of applications submitted online has risen by 18.6% since January 2020, but the percentage of those approved and paid out increased by 55.5%.
“There is probably more than one factor in effect here,” said Tew. “There are some anecdotal indications that applicants entering the market now may be of a higher quality than previously, largely people who were waiting until showrooms reopened in April. Plus, in addition, there is a long-term trend of improving quality of online applications.
“Also, it could be that, as economic confidence increases, some motor finance providers are starting to loosen their lending criteria a little following the pandemic.”
Stock shortages and rising used car prices are likely to continue through the third quarter of 2021, as new car supply continues to be affected by the global semi-conductor shortage.