Consumer demand for motor finance remains strong despite surging interest rates, with engagement up 46% on pre-pandemic levels according to Auto Trader.

Despite the current backdrop of economic uncertainty, more than 1.9 million finance calculator interactions were recorded on Auto Trader last month.

Between 25,000 and 30,000 finance leads are passed to retailers each month, through the platfrom.

Auto Trader’s automotive finance director Fiona Mackay said: “All signs on our marketplace point to the growing importance of finance, especially amongst used car buyers. With average second-hand prices up around 47% on pre-pandemic levels, coupled with the current economic turbulence, finance offers many car buyers a more manageable route to access their next car.

“Although the vast majority of our retailer partners advertise finance on their adverts, nearly a quarter don’t – with more price conscious consumers searching by monthly payments, a significant, and worrying, number of businesses are at risk of missing out.”

The cost of borrowing has risen sharply on new cars, with the average rate climbing from 4.6% in November 2021 to 7.7% this month. The growth in used car APR has been less steep, albeit from a higher base level, rising by just over 1 percentage point from 9.4% to 10.7% over the same period.

What Car? found that monthly payments on new car finance contracts have risen by more than 40% on some models since 2019. It found average monthly personal contract purchase (PCP) payments had risen by at least 22.4% across the sample models, with petrol and hybrid variants of the Volvo XC40 recording a 42.5% rise in average monthly payments.

Despite the higher cost, Auto Trader’s data reveals a steady upward trajectory of engagement over recent months, with September and August recording a 43% and 36% increase on 2019 levels. And in January of this year, consumer interaction was up a comparatively conservative 22% on January 2019.

There’s also been little change in the terms selected by consumers on the calculators, in regard to both monthly payments and preferred deposit levels. Last month, 50% of all monthly payment options were below £250, which is down just 1.0 percentage point on January 2022 (51%), and flat against October 2021 (50%). The higher price bands remain similarly flat or just 1.0 percentage point different. It’s an almost identical picture on the chosen deposit contributions, according to Auto Trader. 

The data shows that nearly two thirds of people (63%) want to complete their finance applications online before arriving at the forecourt. As part of its strategy to meet the changing needs of car buyers,  Auto Trader enables consumers to apply online for finance with the retailer’s preferred lenders.

Analysis by The Car Expert shows that UK car finance debt has increased by £29bn, since 2009, to £40bn. Almost all (circa 92%) new cars are purchased using finance agreements, along with a growing number of used cars.

The Car Expert also found that the average amount financed per new car has more than doubled, increasing from just under £12,000 at the start of 2009 to more than £25,000 by the end of June 2022.

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