'Strong' demand for car finance, says FLA

Demand from consumers for new car finance is strong, but motor finance providers remain cautious about the prospects for 2010 as the UK slowly recovers from recession, the Finance & Leasing Association (FLA) says.According to FLA statistics, in October the number of new cars bought by consumers using forecourt finance was up 18 per cent, compared with the same time last year. Demand for new car finance was particularly weak during the final months of 2008, but this year, car buyers are taking advantage of the reduced VAT rate as well as the attractive finance options available in dealerships. The FLA expects new car finance to perform well in the last two months of the year ahead of the return to a higher VAT rate in January.However consumer used car finance market continues to contract, falling 14 per cent by volume in October compared with the same month a year ago. Overall, in the 12 months to October new and used car finance volumes fell 21 per cent and 13 per cent respectively, compared with the same period in 2008.Commenting on October’s motor finance figures, Paul Harrison, Head of Motor Finance, said: “While recent growth in new car finance is welcome, the withdrawal of Government incentives in 2010 – in particular, the 15 per cent VAT rate – will affect demand. The end of the scrappage scheme may also mean a return to more traditional buying behaviour in the new and used car markets."Wholesale finance remains expensive and we shall be closely monitoring how this impacts on the motor finance market in 2010. We hope to see positive results from the Government’s efforts to improve the wholesale market.”

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