The cost of living crisis is pushing new and used car buyers to opt for financing over cash purchases, according to a study by What Car? found.
As part of its weekly industry research, What Car? surveyed 1,060 market buyers. Of those buying through finance, a quarter (25.8%) said the cost of living crisis influenced their decision to borrow – helping spread the cost of buying – while 74.2% s were still waiting to buy through finance.
Personal contract purchase (PCP) and hire purchase (HP) plans are the most popular among financial services buyers, accounting for nearly two-thirds (63.4%) of those buying through finance, while a quarter were undecided. PCP and bank loans represent 9.5% of planned purchases.
Of all the buyers in the market participating in the study, 34.7% planned to buy within the next four weeks, while 24.3% planned to buy within one to three months. Nearly one-fifth (19.8%) of all buyers were looking to buy an all-electric vehicle (EV).
Steve Huntingford, Editor of What Car?, said: “The cost of living crisis is clearly influencing buying decisions and is already impacting whether people buy with cash or finance.
“Financing spreads the purchase cost over several months and, under the agreement, buyers can simply return the car at the end of the contract and exchange it for a different model, which adds flexibility and reduces commitments.
The used car sector saw double-digit growth in the value of new consumer credit business generated in July 2022 as supply issues continued to dampen new car registrations.
Auto finance providers are likely to tighten the criteria on which they base their loans, to minimize their risk during the cost of living crisis.
AM is hosting a webinar tomorrow for law firm Freeths to give UK car retailers insight into how they should prepare for Consumer Duty, the Financial Conduct Authority’s new regime.