More consumers turning to car finance despite rising rates

Interactions with finance calculators on used car adverts are up: 42% increase on January 2019 levels and 11% increase from January 2021.

Deposit levels are slightly in flux: 20% of finance calculations included a £2,000-£4,999 deposit in January 2023, up from 17% in January 2022. In January 2023, 34% of finance calculations used a £1,000-1,499 deposit, down from 40% in January 2022.

New car APRs have increased significantly, from an average of 5.1% in January 2022 to 8.1% in January 2023: For example, in January 2022, a £50,000 new car cost £1,039.27 a month on a Hire Purchase, in January 2023 this has risen to £1,094.66 a month - almost £60 more.[1]

In January 2022, a £50,000 new car cost £690.67 a month on a PCP agreement, in 2023 this has risen to £729.77.[2]

Used car APRs have seen less growth, from, on average, 9.2% in January 2022 to 11.1%: For example, in January 2022, a £15,000 used car cost £297.67 a month in a Hire Purchase agreement, in January 2023 this would be £307.66 – less than £10 increase for monthly budgets.[3]

In January 2022, a £15,000 used car cost £198.45 a month in a PCP deal, in January 2023 this would be £205.11 – less than £7 increase for monthly budgets.[4]

 Ian Plummer, Commercial Director at Auto Trader commented on recent rate rise:

“Sizeable increases in new car APR averages, up from 5.1% in January 2022 to 8.1% 12 months later, have followed the recent spate of interest rate rises. And whilst the impact on used car rates haven’t been quite as sharp, they’re still on the up – increasing from 9.2% to 11.1% over the same period.

“As most drivers don’t have a choice about whether to stay on the road, and with post-Covid stock shortages keeping prices high, motorists are having to swallow extra costs. As a result, many are turning to car finance, with nearly 2 million finance interactions on our marketplace each month, which equates to 45 every minute.”

1 Both PCP agreements were calculated with £3,000 deposit, 12,000 miles and a 48-month term. 5.1% APR for 2022, 8.1% APR for 2023. Calculation is a representative example and is only relevant to finance deals starting in the month stated - existing finance deals will not be affected.

2 Both PCP agreements were calculated with £5,000 deposit, 48-month term and optional £15,000 final payment. 5.1% APR for 2022 calculation, 8.1% APR for 2023 calculation. Calculation is a representative example and is only relevant to finance deals starting in the month stated - existing finance deals will not be affected.

3 Both Hire Purchase agreements were calculated with £3,000 deposit, 48-month term and £12,000 optional final payment. 9.2% APR for 2022 calculation, 11.1% APR for 2023 calculation. Calculation is a representative example and is only relevant to finance deals starting in the month stated - existing finance deals will not be affected.

4 Both PCP agreements were calculated with £3,000 deposit, 48-month term and 12,000 miles. 9.2% APR for 2022 calculation, 11.1% APR for 2023 calculation. Calculation is a representative example and is only relevant to finance deals starting in the month stated - existing finance deals will not be affected.

*Article Source www.newspress.co.uk