UK car finance applications on the rise in Q2, 2020
MACCLESFIELD 24 September 2020 | Analysis: Dawn Wood, Monevo Operations Director
Whilst many consumers in the UK have adjusted to life under the threat of a pandemic, for lenders and other financial institutions it is a continued period of delayed growth that is welcome but difficult to predict in its entirety.
The latest report from the Financial Times seems to add more credence to this, given that car finance applications through Experian were up to 597,000 in July and August, compared to 481,000 in 2019. This is a rise of just over 24 percent, which, considering showrooms were shut from March-June, is a considerable turnaround.
Furthermore, Yahoo has reported finance and leasing association figures of 76,500 new cars financed in July, which is up by 9 percent from 2019 alone. In fact, a total of £1.72 billion was loaned by car finance providers in July, which is up by 20 percent from the same month in 2019.
These figures are also interesting in that they occur prior to September, a month which usually comes with high-demand for new cars in relation to new registration plates being produced. Encouragingly, this demand for borrowing is just one sign that consumers are looking to get back to normal, with this particular area benefitting from a significant rise, after dwindling for the past few months under lockdown.
What can the rise be attributed to?
Many current trends are directly linked to the pandemic, this rise in car finance applications is no exception. However, there are also a few cultural shifts that can be attributed to the rise:
- Pent-up demand from consumers after businesses being closed between March and June
- Commuters are looking for alternatives to public transport
- More stable period of income for many as businesses reopen and furlough is reduced
Now that we are entering into a more stable period for businesses and consumers (compared to just a few months ago), demand for new and used cars has been bolstered. This is backed up by consumers looking for alternatives to public transport and consumers who have remained unaffected by lockdown and have simply been waiting for forecourts to reopen.
These are just a few factors to take into account when looking at the rise in car loan applications, though there will be many more things to consider as we enter Q3 and how the pandemic affects consumers’ ability to borrow money.
The specific instances listed above have all contributed to the rise in car loan applications over the last two months, but the question is whether this demand will continue or be curbed by further lockdown regulations or changes in the law surrounding the pandemic. There are a few points we can summarise about the findings below:
- Positive figures in July and August to show borrower demand is coming back
- Overall figures still down due to lockdown restrictions during 2020
- More stability for consumers in the next few months will allow demand to return, especially during September where there is usually an increase demand for vehicles in relation to new registration plates
This is a wholly positive result for the lending market, but it remains to be seen if these figures can continue to rise into Q3.
As for Monevo car loan applications, customer demand started to return to pre-covid levels in June and July with lender appetite slowly increasing from May with a further uptick from July which is still standing strong.
However, we remain cautiously optimistic into Q3 to see whether this supply and demand continues as infection rates and economic recovery are on a knife edge. If the prevalence of local lockdowns continue, this will undoubtedly affect demand levels from consumers, and a difficult economic climate could affect lender supply of car finance.
Tracking this positive trend, Monevo will be adding to their car loan panel in Q3. Watch this space for new partnership announcements.