Car finance market contracts further

The consumer car finance market is continued to struggle through June with growing demand for used car finance failing to offset declines in demand for new car finance.

According to new figures released by the Finance & Leasing Association (FLA), new business volumes fell in June 2022 by 12% compared with the same month in 2021. The corresponding value of new business decreased by six per cent over the same period.

The consumer new car finance market reported a fall in new business of 21% by value and 28% by volume in June compared with the same month in 2021, while the consumer used car finance market reported new business up 10% by value, but three per cent lower by volume in the same period.

Geraldine Kilkelly, director of research and chief economist at the FLA, said: “In June, the new car finance market reported its largest contraction in new business volumes since February 2021 as vehicle shortages continued to disrupt the market’s recovery. By contrast, the business used car finance market reported record monthly new business volumes in June, and consumer used car finance new business volumes were only slightly lower than in June 2021.

“Consumer spending is expected to weaken during the second half of 2022 as incomes are squeezed by higher inflation, interest rates, and taxes. Our quarter three industry outlook survey suggests 56% of motor finance respondents expect growth in new business over the next year, down from 76% in the quarter two survey.”