With all the options for car finance ranging from personal contract purchase and personal contract hire to hire purchase, there is no doubt that it can be an accessible way for a driver to obtain the vehicle they desire. But is car finance gaining in all-round popularity, too?
Let’s look at the stats…
In 2021, there was £45 billion of motor finance taken out in the UK, which amounts to 92% of all private new car registrations, according to the Finance and Leasing Association (FLA). This is lower than what FLA data showed for 2020 (more than 93%), but in line with the situation in 2019, despite the adverse effects of the coronavirus pandemic.
Over the period 2020-21, more than two million cars were purchased on finance in the UK, accounting for both businesses and consumers. Of these, the majority of consumer purchases were of used cars, at 1.34 million, and 728,690 were new, whereas conversely, businesses tended to buy new cars (323,660) over used cars (50,490).
By looking at this data, we can see a trend beginning to form – despite the economic impact of COVID-19, UK car buyers still swayed towards car financing options, with financing allowing more consumers to invest in used cars, and more businesses to invest in new motors.
But why is car finance becoming more popular in the modern era? Let us take a look at some of the benefits of opting for car finance throughout the UK.
Benefits of car finance
- Less impact on the driver’s savings
Many car finance options will come with an option that requires little to no deposit. Even if you do need to put down a holding deposit, this will still be a lot cheaper than buying a car outright with cash. Instead, you can keep your savings to spend on other things like a holiday or a home makeover.
- Potential to get a better car
As you will only need to pay back a set amount of money each month, this can open up more car model options for you to choose from – some of which might have otherwise been significantly out of your budget.
- Trade-in options
Some financing options will allow you to trade in your old car for a cash discount off your purchase which saves you the hassle of trying to sell your car privately.
- Budget-friendly
Repayments are a set amount every month, meaning that you can effectively organise your finances on a monthly and annual basis.
- Builds credit score
Repaying your car finance can help you to build up your credit score, as it will show lenders evidence that you are capable of consistently making loan payments on time.
- No worries about depreciation
At the end of the contract, you don’t need to worry about the car’s cost depreciating – you can either keep it for yourself (in which case depreciation might be a worry), exchange it for a new one, or even hand the car straight back if you don’t want it anymore, offering you more flexibility. Naturally, the exact possibilities you have here will depend on the terms of your specific car finance agreement.
- Change cars more frequently
Car finance will last for an agreed term, and after that term, you might like to exchange your car for a brand new one. This means you can effectively get a new car every few years without having to fork out for the motors upfront.
And there you have it – everything you need to know about how and why car finance is becoming a more popular choice for both consumers and businesses around the UK.
