Auto finance boom predicted as ‘lockdown handbrake’ eases off
Demand for auto finance is fast accelerating and a boom could be on the cards as consumer confidence rises.
Data from Zopa reveals that year-on-year, the total amount of car finance lent by the digital bank has increased 50% from February 2020, on the back of easing lockdown conditions and pent-up demand for big ticket purchases – boding well for the new and used car markets.
As many people have been able to save more through the lockdown and bolster household finances, the figures from the neobank suggest that a sense of financial comfort is leading to people feeling more able to commit to the monthly payments associated with a car finance loan. The average car loan made in Q1 was just under £10,000.
Newly released data from the Office for National Statistics reveals the savings ratio reached a record 16.3% last year, up from 6.8% in 2019. And the findings point to an evolving picture of household finances as the UK emerges from the pandemic lockdown.
Government advice around avoiding public transport may also be playing a part, as people reconsider how they travel. Recent data revealed levels of car use returned to normal between lockdowns, but train travel has peaked at around 40% of pre-Covid levels, according to Department for Transport data.
Increased spending levels on auto finance could also be in response to the expectation of increased driving activity as families plan more UK-based holidays, in line with the Government guidance.
Tim Waterman, chief commercial officer at Zopa, said: “At the start of the pandemic, people were cautious about spending as many predicted some personal financial shocks. For those who were able to save, there’s a sense of financial security, which is now giving them the confidence to spend. As lockdown begins to ease, the handbrake is coming off and a new car appears to be high on the shopping list.
“Zopa’s car finance data suggests that consumers are feeling buoyant and optimistic and ready to kick start their plans for the future and we are keen to help them do that.”