Resilient Consumer Car Finance Sector Navigates Shifting Landscape

The consumer car finance sector has demonstrated its resilience, recording modest growth in July 2024 despite the broader economic challenges. According to the latest figures released by the Finance & Leasing Association (FLA), new business volumes rose by 1% compared to July 2023, reflecting a 2% increase in the value of new business over the same period.

Navigating Changing Tides in the Consumer Car Finance Market

Steady Growth in July 2024

The consumer car finance sector experienced a positive start to the third quarter of 2024, with both the value and volume of new business seeing modest growth in July. This growth was driven by consumers' improved optimism about their personal financial outlook, as better news on inflation and interest rates encouraged them to commit to big-ticket purchases.However, when examining the seven-month period leading up to July 2024, the sector faced a slight decrease in new business, with a 2% decline in value and a 3% drop in volume compared to the same period in the previous year. This suggests that the sector has navigated a shifting landscape, adapting to changing market conditions.

Divergent Trends in New and Used Car Finance

The consumer new car finance market saw a 5% increase in new business value in July 2024 compared to the same month in 2023, despite a 3% drop in new business volumes. This indicates that consumers were willing to invest in new vehicles, even as the overall demand for new cars declined.In contrast, the consumer used car finance market experienced a 1% decrease in the value of new business in July 2024 compared to July 2023, while new business volumes increased by 3%. This suggests that consumers were more inclined to purchase used vehicles, potentially driven by factors such as affordability and availability.

Outlook for the Consumer Car Finance Sector

Looking ahead, the FLA's research director and chief economist, Geraldine Kilkelly, expects the value of new business overall in the consumer car finance market to be slightly lower in 2024 than in 2023. This projection is based on a 1% growth in the consumer new car finance market, offset by a 3% decline in the consumer used car finance market.This mixed outlook underscores the dynamic nature of the consumer car finance sector, where shifting consumer preferences and broader economic factors can influence the demand for both new and used vehicles. The industry's ability to adapt and respond to these changes will be crucial in maintaining its resilience and growth in the years to come.