The car industry in the UK is ever-growing as more people rely on vehicles daily, but purchasing a car can be expensive, so many look for alternative solutions like finance. Auto financing is an integral part of the UK car market, enabling customers to purchase cars without having to pay the full amount upfront. While this market is massive, most people know surprisingly little about it. Here are five interesting facts about the UK auto financing industry.
It Is Not Just Cars That Use Auto Finance
There are a growing number of people in the UK who are using auto finance for recreational vehicles like motorhomes, caravans, and even horseboxes. These are typically specialist vehicles that are expensive to fund, and they need specialist financiers who understand the market. Companies like Auto Finance Online provide quotes from lenders who can approve a borrower within minutes, so one can shop for their next motorhome, caravan, or horsebox with the knowledge that their finances are taken care of.
Auto Finance Is The Largest Consumer Credit Market In The UK
According to the Finance & Leasing Association, the UK auto financing industry is the largest consumer credit market in the UK, with over £47 billion in new business written in 2019. This makes it a crucial part of the UK economy, providing a significant source of revenue for lenders and dealerships.
PCP is the Most Popular Form of Auto Finance
Personal Contract Purchase is the most popular form of car finance in the UK. According to the FLA, in 2019, 73% of new car finance deals were PCP agreements. This is because PCP agreements often offer lower monthly payments than other types of finance agreements. Always consider long-term financial commitments before agreeing to a PCP deal.
Many Auto Finance Customers are Millennials
Millennials are the largest group of car finance customers in the UK, accounting for 51% of all car finance deals in 2019. This is partly due to the fact that many millennials prefer to have the latest technology and features in their cars, which can be more expensive to purchase outright. Millennials are also more likely than their older peers to purchase cars with finance.
Alternative Fuel Vehicles are Becoming More Popular
Alternative fuel vehicles, such as electric and hybrid cars, are becoming increasingly popular around the world and in the UK. According to the FLA, in 2019, 11% of all new car finance deals were for alternative fuel vehicles, up from just 1% in 2014. This trend is expected to continue as more people become environmentally conscious. Electric cars are not perfect, but they do reduce the individual use of fossil fuels.
The UK Auto Financing Industry is Heavily Regulated
The UK auto financing industry is heavily regulated to protect customers from unfair practices. The Financial Conduct Authority took over regulation of the industry from the Office of Fair Trading in 2014, and since then, the FCA has introduced several measures to protect consumers.
One key regulation is the cap on the amount of commission that dealerships can charge. In 2020, the FCA introduced new rules to ban certain types of commission models that incentivize dealerships to charge higher interest rates to customers. This regulation ensures that customers are not charged excessive fees for their car finance agreements.
Another important regulation is the requirement for lenders to assess a borrower’s affordability before providing finance. Lenders must take into account the borrower’s income, expenses, and credit history to ensure that the borrower can afford the repayments. This regulation helps prevent borrowers from being sold car finance agreements they cannot afford.
The FCA also requires lenders to provide clear and transparent information about the cost of borrowing, including interest rates and fees. This regulation ensures that customers are fully informed about the cost of their car finance agreement before they sign the contract.
