Paragon Car Finance’s latest biannual Headlight Report has revealed strong growth in the vehicle finance market during the second half of 2016 for the UK’s top 30 automotive brokers.

Reflecting recent SMMT data which reported 175,000 new car registrations in January, 46% of brokers surveyed by Paragon saw an increase in new car finance applications in the six months to December, with a further 9% reporting a significant increase.

The survey, which aims to take the pulse of the UK’s top 30 vehicle finance brokers, found that brokers have also seen growth in the used car market, with 59% of respondents saying they’ve seen an increase in finance applications over the previous six months.

Julian Rance, head of Paragon Car Finance, said: “While there has been strong growth in new car finance in early 2017 the market is, in many ways, overstated. A range of non-business-as-usual factors have contributed to this including better than expected post-Brexit economic indicators and low interest rates.

“Looking forward to the rest of 2017 we should expect some market adjustment and a 5-10% decrease in the size of the market, driven by low sterling and ongoing political and economic uncertainty.”

Asked to rate overall car buyer confidence from 1-10, respondents gave an average score of 6.9.

This figure remains below pre-Brexit levels of 7.4, but represents a significant increase on last survey’s figure of 5.9.

Despite ongoing uncertainty around Britain’s trading relationships and major elections in the EU due in 2017, brokers expect growth to continue.

Looking forward to the next six months 32% of those surveyed expect continued growth in new car finance while 46% expect further growth in the used car market.

Asked what was driving this growth, an overwhelming 79% of respondents cited the primary reason as being low interest rates, up from 54% in the last survey.

Reflecting possible future downward pressures on the market however, the percentage of respondents citing higher disposable income as a contributory factor has fallen from 35% in Q1 2016, to 16% at present.

Likewise, just 16% of respondents described greater security of employment as a factor, down from 47% in Q1 2016. 

Rance said that an expected decline in new car sales meant opportunity elsewhere. She said: “The other side of a declining new car finance market however, is a boost to used car finance, which our survey respondents expect to continue growing strongly through the rest of the year.

“This will be good news especially for brokers, the bulk of who’s trade is in used cars.”