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MARKET REPORT DETAIL

Car Finance - UK - January 2012

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Published Date: Jan, 2012
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  • Abstract
  • Table of Contents
Some questions answered in the report include:
  • How has the car finance market performed recently?
  • And how is the wider motor retailing industry faring?
  • What is the outlook for the new car market in 2012?
  • How often are people replacing their cars?
  • Will changes in the automotive distribution chain hit demand for car finance?
  • Are car supermarkets making much of an inroad into the used car market?
  • How has the industry reacted to the idea of further changes to consumer credit regulation?

Introduction
Report scope and definitions Abbreviations

Executive Summary
The market Sales volumes are growing steadily, and this trend should continue
Figure 1: Forecast of the car finance market, by volume sales – fan chart, 2006-16
Used car sector continues to perform well Performance of related products Key factors The retail car industry Banks have become more risk-averse Regulatory developments Companies, brands and innovation Ford Credit, VWFS and GMAC are the market leaders Recent innovation Limited above-the-line advertising Distribution mix
Figure 2: Where purchased main car from, 2011
The consumer Trends in car ownership, annual mileage and vehicle replacement 68% of UK adults have their own car
Figure 3: Proportion of adults who drive and own a car, October 2011
9% bought their last car with dealer/manufacturer finance
Figure 4: Method of financing most recent car purchase, October 2011
14% of adults plan to buy a car within the coming year
Figure 5: Intention to buy a car within the next year, October 2011
Attitudes towards car finance What we think

Issues in the Market
How has the car finance market performed recently? And how is the wider motor retailing industry faring? What is the outlook for the new car market in 2012? How often are people replacing their cars? Will changes in the automotive distribution chain hit demand for car finance? Are car supermarkets making much of an inroad into the used car market? How has the industry reacted to the idea of further changes to consumer credit regulation?

Future Opportunities
Offer exciting discounts and promotions to appeal to bargain-hunters Improve penetration of the used car market to take advantage of the downsizing trend

Internal Market Environment
Key points Size of car parc stabilises
Figure 6: Number of cars in use in the UK, 2002-12
Ageing car stock
Figure 7: Age distribution of cars in use, 2010
New car sales plateau at two million…
Figure 8: New car registrations, by type, 2003-12
… while used car sales similarly stabilise, at 6.8 million
Figure 9: Volume of new and used car sales, 2003-11
UK car sales totalled £65 million in 2011, broadly in line with 2010
Figure 10: Value of new and used car sales, at current prices, 2003-11
Margins on loan rates have increased noticeably since 2008
Figure 11: Average advertised unsecured loan rates, finance house base rate and three-month LIBOR, October 2007-October 2011
Proposed changes to consumer credit legislation

Broader Market Environment
Key points Summary of the main macroeconomic indicators impacting on the consumer credit market Low consumer confidence depresses demand for big-ticket purchases
Figure 12: GfK Consumer Confidence Barometer – UK, January 2004-December 2011
Household unsecured debt fell by 11% over the 2008-11 period
Figure 13: The value of personal sector debt (mortgages and consumer credit) and as a proportion of total PDI, at current prices, 2000-11
Net lending increases, but from a very small base
Figure 14: Net consumer credit lending, 2007-11

Competitive Context
Key points Around three in five new private-car sales funded by point-of-sale dealer finance in 2011
Figure 15: Proportion of new private car sales bought with a car finance agreement, 2008-11
Car finance accounts for a much smaller share of used car sales
Figure 16: Proportion of used car sales bought with a car finance agreement, 2008-11
Rival products and alternative funding solutions
Figure 17: Method of financing most recent car purchase, October 2011
New gross consumer credit lending increases slightly in 2011
Figure 18: Gross consumer credit lending, by type, 2007-11
The most common reason people take out a personal loan is to buy a car
Figure 19: Reason for taking out personal loan, 2009-11

Strengths and Weaknesses in the Market
Figure 20: Point-of-sale car finance – market strengths, weaknesses, opportunities and threats, 2012

Who’s Innovating?
Key points Limited scope for real product innovation Vauxhall introduces tailor-made finance package FinanceAcar launches world’s first car finance comparison site Moneybarn unveils the UK’s first online car finance calculator for the non-prime market

Market Size and Forecast
Key points Over one million car finance plans are sold by dealers each year
Figure 21: Volume and value of point-of-sale car finance plans sold (private sector only), 2003-11
Used car sector continues to grow, while sales of new car plans experienced a modest fall in 2011
Figure 22: Volume and value of private car finance plans sold, segmented by new and used cars, 2008-11
Mintel predicts steady market growth over the next five years
Figure 23: Volume of point-of-sale (private) car finance plans – fan chart, 2006-16
Figure 24: Value of point-of-sale (private) car finance plans, at current prices – fan chart, 2006-16
Figure 25: Forecast of the point-of-sale (private) car finance market, by volume and value, 2006-16
Forecast methodology Fan chart explanation

Market Share
Key points Most car manufacturers have set up subsidiaries to provide financing Specialist providers Manufacturer subsidiaries Ford has the largest share of the new car market, followed by Vauxhall
Figure 26: Share of new car registrations, by manufacturer, 2009-10

Companies and Products
Ford Credit GMAC Financial Services Volkswagen Financial Services Black Horse Santander Consumer Finance

Brand Communication and Promotion
Key points Loan adspend increases in 2011, but is still way down on pre-crisis levels
Figure 27: Advertising expenditure on car finance and loan products, 2007-11
Nissan is the top car finance advertiser in 2011
Figure 28: Top five advertisers in the car finance market, 2011
Most advertising is channelled through the press
Figure 29: Advertising expenditure on car finance, by media type, 2011

Channels to Market
Key points Most car finance is sold at the point of sale The franchised dealership is the main distribution outlet for new car finance
Figure 30: Ten largest franchised dealer networks in the UK, by brand and number of outlets, 2006-10
Growth of the online sales channel Car supermarkets strengthen their presence in the used car market New and used car markets have a different distribution mix
Figure 31: Where purchased main car from, 2011

Annual Mileage, Owning and Replacing Cars
Key points Steady fall in multiple car ownership…
Figure 32: Number of cars owned by household, 2007-11
… and in the number of full licence holders
Figure 33: Ownership of driving licence, 2007-11
Most people drive 12,500 miles or less a year
Figure 34: Miles driven per year, 2011
More than half of all car owners spent £6,000+ on their main car
Figure 35: Cost of car (main car only), 2011
A five-door hatchback is the most popular style of car
Figure 36: Type of car owned (main car only), 2011
Nearly one in three drivers obtained their main car five or more years ago
Figure 37: When obtained (main car only), 2011
One in 20 car owners will replace their main car every two years or less
Figure 38: Frequency of replacing car (main car only), 2011

Car Ownership
Key points About Mintel’s consumer survey Just over two thirds of UK adults have a car
Figure 39: Proportion of adults who drive and have their own cars, October 2011
Nearly half of new car owners bought their car less than two years ago
Figure 40: Segmentation of car owners, by type of car owned and when bought, October 2011
A person’s socio-economic status strongly affects their propensity to own a car
Figure 41: Car ownership, by gender and socio-economic group, October 2011
Those aged 55-74 are most likely to have a new car
Figure 42: Car ownership, by age of owner, October 2011

Method of Financing Last Car Purchase
Key points One in 11 car owners used point-of-sale finance to buy their last car
Figure 43: Method of financing most recent car purchase, by type of car owned and gender, October 2011
The typical car finance customer is aged 35-54…
Figure 44: Method of financing most recent car purchase, by age group, October 2011
… and works full-time, with a household income of £15.5-25K One in five HP customers part-exchanged their vehicle
Figure 45: Method of financing most recent car purchase, by those who used their savings, loan and HP agreement, October 2011

Car-buying Intentions
Key points 7 million UK adults are intending to buy a car within the coming year
Figure 46: Intention to buy a car within the next year – all adults, October 2011
Most car sales will be made by existing car owners
Figure 47: Intention to buy a car within the next year – all adults, October 2011
Used car owners are slightly more likely than new car owners to be planning a purchase
Figure 48: Intention to buy a car within the next year – existing car owners only, October 2011
ABs are a major target group for the new car market
Figure 49: Intention to buy a car within the next year, by gender and socio-economic group, October 2011
Those aged 35-54 are the main target audience for used cars
Figure 50: Intention to buy a car within the next year, by age, October 2011
Around one in eight people who are planning to buy a car used dealer finance to fund their last purchase
Figure 51: Method of financing most recent car purchase, by car owners and prospective car buyers, October 2011

Attitudes Towards Car Finance
Key points Most people like to own their car outright
Figure 52: Attitudes towards car finance, by car owners and those intending to buy a car within the next year, October 2011
Just 3% of car owners think that dealer finance is a dearer option than taking out a loan Men are much more likely than women to consider a lease purchase deal
Figure 53: Attitudes towards car finance, by gender, October 2011
One in seven car owners aged 35-44 could not afford to buy a car without finance
Figure 54: Attitudes towards car finance, by age, October 2011

Appendix – Car Ownership
Figure 55: Car ownership, by demographics, October 2011

Appendix – Profile of Drivers and Car Owners
Figure 56: Demographic profile of car owners and drivers, October 2011

Appendix – Method of Financing Last Car Purchase
Figure 57: Method of financing most recent car purchase, by demographic, October 2011

Appendix – Car Buying Intentions
Figure 58: Intention to buy new car within the next year, by demographics, October 2011

Appendix – Profile of Car Finance Customers
Figure 59: Demographic profile of car finance customers, October 2011

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