Is car finance the next borrowing bubble?
A report from the Society of Motor Manufacturers and Traders (SMMT), about 80 per cent of new cars in the UK are sold on Personal Contract Purchases
A report from the Society of Motor Manufacturers and Traders (SMMT), about 80 per cent of new cars in the UK are sold on Personal Contract Purchases
Currently, vehicle finance is second only to the mortgage market in term of lending. It has grown from £32.7billion in 2014 up to £41 billion in 2016, according to the Financial Conduct Authority.
There are a range of finance options available for consumers to choose from, such as Hire Purchase (HP) agreements, the very popular Personal Contract Purchases (PCPs) and Personal Contract Hires (PCHs)
The car industry is one aspect of the UK market which is booming. Figures released by the Finance & Leasing Association (FLA) saw new business up BY 19% by value and 13% by volume in Q1 overall in comparison to last year. According to the FLA, 348,059 used cars worth a collective £3.8billion have been put on finance in the first three months of the year.
This will only heighten fears that the car finance sector has grown dangerously. The Bank of England and the Financial Conduct Authority have both expressed concern over the rise in car finance, which has not been abated by Brexit or inflation.
David Rodger, CEO of Debt Advice Foundation said;
“The FCA has launched a probe into the car finance sector as these type of deals are proving immensely popular, allowing consumers to not only access a car, but access an expensive model.
“Anyone who takes out finance in this way needs to make sure they are aware of what happens at the end of the term and that they can easily afford the repayments required until then.”
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