Paragon Car Finance Headlight Survey

The new car market has been growing for the last three years and while the debate over registrations versus sales will rattle on, there’s no escaping the fact that retail buyers are in the market and with interest rates at an all-time low they have cash to spend.

Indeed, recent figures produced by the Finance and Leasing Association showed that point of sale finance sold by dealers accounted for 57% of all consumer spending on cars in 2014, up from 35% in 2007. The growth is easy to explain. We all know that the way cars are funded has changed significantly since the recession with buyers now focused on easy to budget low APR monthly payments and taking advantage of some highly competitive finance deals.

But just how competitive are these deals? We suspect one of the best currently available to car buyers is a new Ford Ka from Evans Halshaw for just £77 a month over two years, that’s just £1 more than a Sky Complete Bundle package.

An important but often over-looked part of the growing finance market is the role played by brokers, a fact highlighted in the first Paragon Car Finance Headlight Survey, which has set out to track the views of the UK’s largest players on a quarterly basis.

Its newly published Summer 2015 report shows that confidence amongst the UK car-buying public is buoyant, with 60% of brokers describing car buyer confidence as strong or very strong.

This is reflected in brokers’ optimism about the future, with three-quarters (74%) expecting to finance more vehicles over the next three months and over one quarter (26%) expecting to finance about the same amount.

Despite this optimism, the majority of brokers are not expecting to see a surge in new car registrations in the next three months. As the market prepares for the September plate-change the majority of brokers (74%) expect registrations to be stable compared with the same period last year, with just 22% expecting an increase and 4% anticipating a drop.

The survey also highlights that finance customers have been replacing their cars more frequently over the last 12 months, with three times as many brokers reporting that the replacement cycle has become shorter (39%) for their customers than those who’ve seen it lengthen (13%). Overall, brokers report that one in eight finance customers (13%) now replace their cars at least once every two years, almost half (48%) exchange their car every three years and the remaining 39% replace their vehicle every four years.

Significantly, 23% of brokers report that customers are willing to pay a little more each month when arranging finance for a car purchase, painting an encouraging picture of continued steady growth.

“Brokers have a unique insight into the market and it’s important for lenders to understand their perspective and shape our products accordingly. The level of optimism that brokers are reporting is very positive and a marked demonstration of the strength of the UK car finance market,” said Julian Rance, head of Paragon Car Finance.

This first survey has provided a valuable insight into a sector that traditionally has not had much of a voice. Significantlyit also shows how confident buyers are and could prove to be a useful barometer over the coming months, which are likely to see a rise in interest rates and a slowdown in registrations.

The inaugural Headlight Survey from Paragon Car Finance found customers prepared to put down larger deposits on new cars than used ones. While this result is hardly surprising, the research did helpfully show just how big the difference is.

The average deposit for new cars, including part-exchange, on most finance agreements (54%) is between 11% and 25% of the vehicle’s value.

In contrast, for used cars, the average deposit, including part-exchange, is between 1% and 11% of the value of the vehicle for most agreements (46%).

Over 60% of brokers expect the average deposit on new and used cars to stay about the same over the coming months.