Motor finance sales show first increase in more than a year

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Sales of new cars bought by consumers using dealer finance have grown for the first time since July 2008, according to figures published today by the Finance & Leasing Association (FLA).

In August, the number of new cars sold with dealer finance to consumers increased by 4% compared with the same month last year.

While this is welcome, a recent survey of FLA members confirmed that the high cost and restricted availability of wholesale funds remains a serious threat to the market.*

The Government’s confirmation last month that it remains in discussion with the European Commission about a guarantee scheme that might help ease wholesale funding pressures was welcome. But a positive result from these talks is now urgent.

Commenting on the figures, Geraldine Kilkelly, Head of Research and Chief Economist at the FLA, said: “This is the first increase in dealer finance provided to consumers for new cars in over a year. Motor finance companies are telling us that the impact of the car scrappage scheme on finance sales has been limited. Motorists tend to opt for buying small cars and pay the balance from any part exchange under the scrappage scheme with their savings, rather than by using car finance. But dealer finance remains a popular option for consumers. Motor finance companies are offering competitive deals, which are driving sales. For the longer term health of the market, we still need to see progress from the Government in dealing with the wholesale funding issue.”

* In a recent survey of FLA members, 65% of members said that the threat to their businesses from the high cost of funding remained severe