Motor finance deals on the up

The number of cars being bought with finance hit a two-year high in the month of May, according to new figures

In the year to May 2011, 56% of new car sales used motor finance - the highest share of the market since March 2009.

According to the Finance & Leasing Association, the trade body for the motor finance industry, both the consumer new and used car finance markets grew in May 2011. The number of new cars sold on finance was up by 3% on May 2010's sales, and the number of used cars sold on finance was up by 6%.

In the new car sector £505 million worth of finance was agreed in the month of May, and over that 12-month period £6,360 million worth of new finance was agreed by customers through dealerships. In May 38,174 new cars were bought on finance and 485,942 cars were bought from May 2010 to May 2011 using finance deals.

In the used car sector 55,359 models were bought using finance in May and 632,028 were bought over the May-to-May period.

The FLA figures says competitive and flexibility that motor finance offers are the reason for the increase. Take-up of leasing and personal contract purchase agreements for new cars were up by 14% in the last 12 months compared to the previous 12. Hire Purchase agreements, however, fell by 20% over the same period.

Commenting on May's motor finance figures, Paul Harrison, Head of Motor Finance, said: "While economic uncertainty affects consumers when making big purchasing decisions, motor lenders have responded by offering value-for-money packages. More than half of all consumers choose to use finance from the dealer when they buy a new or used car.

"As competition in the credit markets increases we expect consumers to continue to benefit from offers matched to their individual needs and budgets." 

Table 1: Cars bought on finance by consumers through dealerships

Table 2: Cars bought on finance by businesses