As the UK's new car market climbs towards its more natural level, and the flow of used cars onto forecourts increases, motor retailers should be prepared to see more innovation from finance firms and even new entrants, writes Darren Sinclair, chief commercial officer at iVendi.
A range of factors mean that the 2024’s used car finance market is likely to become increasingly competitive.
Larger volumes of used car sales, an ongoing readjustment of vehicle values, and lenders looking to move into new sectors are all likely to have an impact.
Our view is the even if we see a further base rate rise, perhaps by another 0.5%, it is probable that market forces will see motor finance providers start to become more assertive about new business, perhaps as soon as Q1 of next year.
This will be thanks to a range of factors, the most important of which is the ongoing ‘normalisation’ of the used car sector.
We’ve seen much talk in the last few weeks about readjustments in values as volumes of vehicles entering the market gradually grow, and this is something that will have an impact on the amount of motor finance being borrowed.
What we will probably see is greater competition as the market starts to see a higher quantity of lower value financing, and this could lead to responses such as a reduction in APRs or the introduction of other incentives to attract consumers.
Further movement in the market could come from unexpected sources, such as captive lenders moving into non-captive lending.
The shape of the used car market is starting to change, thanks to factors such as electrification and the arrival of several major Chinese manufacturers. The impact of both on used sales is relatively limited so far but that will not be the case for too much longer, and there will be knock-on effects in motor finance.
We would not be surprised to see more lenders move into these developing sectors as well as others in 2024, with a push into new sectors from established players not unlikely.
Again, this could potentially lead to increased levels of competition. What is certain is that the motor finance market is not going to stand still.
Author: Darren Sinclair, chief commercial officer, iVendi
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