Car Finance - UK - September 2009

Table of Contents

• Issues in the Market
• Key issues
• Definitions
• Market in Brief
• Sales of car finance continue to fall...
  • Figure 1: Car finance market size, by value and volume, 2003-09
• ... and have fallen faster than the number of new and used car sales
• A tough automotive market...
• ... and difficult times for consumers
• Banks and manufacturers dominate the market...
• ... while consolidation has reduced the number of active players
• Replacement intentions fall sharply
  • Figure 2: Car ownership, July 2007-June 2009
• Cash buyers dominate the motor market...
  • Figure 3: Car financing methods, June 2009
• ...and are likely to continue to do so
• Internal Market Environment
• Key points
• Growth rate of cars in use slows
  • Figure 4: Number of cars in use (car parc) in the UK, 2003-09
• Decline in new car registrations
  • Figure 5: Trend in private, business and fleet new car registrations, 2003-09
• Used car sales begin to fall
  • Figure 6: Used car sales, 2003-09
  • Figure 7: Mew retail and used car sales, 2003-09
• Car purchase prices and car finance
  • Figure 8: Expected cost of car purchase, new and second-hand, December 2008
  • Figure 9: Expected method of payment for next car, new and second-hand, December 2008
• Lending rates -- advantage POS
  • Figure 10: Unsecured bank and building society lending rates and finance house base rate, August 2007-July 2009
• Falling acceptance rates?
  • Figure 11: Consumer credit* applications and acceptance rates, Jan 2009-Jul 2009
• Broader Market Environment
• Key points
• Economic factors
  • Figure 12: Forecast economic indicators, 2004-14
• Base rates fall to all-time lows...
  • Figure 13: Base rate, January 2000-July 2009
• ... but personal loan interest rates rise
  • Figure 14: Average personal loan rates, May 2007-May 2009
• Bankruptcy and IVAs
  • Figure 15: Individual insolvencies in England and Wales, 2004-09
• Much higher levels of debt in this recession
  • Figure 16: Consumer credit, amounts outstanding, 2003-08
• The post-recession bounce-back
  • Figure 17: Rate of change in total consumer spending and consumer spending on cars, 1989-99
• Debt management
  • Figure 18: Current financial position, by types of credit outstanding, April 2009
  • Figure 19: Current financial position, April 2009
• Financial lifestyle
  • Figure 20: Agreement with selected financial lifestyle statements, 2003-09
• Strengths and Weaknesses
  • Figure 21: Car finance -- SWOT analysis, 2009
• Market Size and Forecast
• Key points
• Total car finance market falls to £21.9 billion
  • Figure 22: Car finance market size, by value and volume, 2003-09
  • Figure 23: Comparison of trends in car finance agreements and interest rates, 2003-09
• Stagnation in average values
  • Figure 24: Car finance market average agreement value, 2003-09
• Market segmentation
• Car dealer finance (POS)
  • Figure 25: Car dealer finance market size, by value and volume, 2003-09
  • Figure 26: Car dealer finance average agreement value, 2003-09
• Direct lending car finance
  • Figure 27: Direct lending car purchase finance (secured and unsecured) market size, by value and volume, 2003-09
  • Figure 28: Direct lending car purchase finance (secured and unsecured) average agreement value, 2003-09
• Finance penetration
  • Figure 29: Trend in private, business and fleet new car registrations and finance penetration, 2003-09
  • Figure 30: Comparison of trends in car finance agreements and car sales, 2003-09
• Forecast
• Market to stage a recovery -- but it will be a slow process
  • Figure 31: Total car finance market, value and volume, 2003-14
• Dealer finance -- time to change direction?
  • Figure 32: Dealer finance market, value and volume, 2003-14
• Direct lending hit hard -- but should recover more quickly
  • Figure 33: Direct lending car finance market, value and volume, 2003-14
• Factors used in this forecast
• Market Share
• Key points
• Personal loans
  • Figure 34: Personal loan market share, by brand and type of provider, September 2008
• The ' big five' cater for half of the market
• Car dealer finance
  • Figure 35: Estimated manufacturer and independent finance company share of new and used car finance market (number of cars financed), 2008
• New car finance
• Black Horse leads the way in the new car market
  • Figure 36: Estimated finance company brand shares of the new car finance market (unit sales), 2008
• Used car finance
  • Figure 37: Estimated finance company brand shares of the used car finance market (unit sales), 2008
• Who' s Innovating?
• Key points
• Still a lack of product innovation
• The funding conundrum
• Longer ownership cycles
• Deferred finance products
• A new innovation required
• Is revolving credit the solution?
• Service rather than product development
• Innovating for the recession
• Companies and Products
• Key points
• Vehicle manufacturer finance companies
• FCE Bank plc
• GMAC Financial Services
  • Figure 43: GMAC' s retail car finance products, by vehicle brand, 2009
• Volkswagen Financial Services (UK)
• Other leading players
• Independent motor finance companies
• Black Horse Motor Finance
• Santander Consumer Finance
• Other finance companies
• Direct lenders
• A more concentrated market
• Brand Communication and Promotion
• Key points
• Overall car finance adspend down...
  • Figure 44: Topline adspend on car finance and selected lending products, 2006-09
• ... and manufacturer adspend has collapsed
  • Figure 45: Adspend by company -- motor manufacturer finance, 2006-09
• Spend on contract plans also falls
  • Figure 46: Adspend by company -- personal contract plans (motor), 2006-09
• Lloyds dominants unsecured personal loan advertising
  • Figure 47: Adspend by company -- unsecured loans, 2006-09
• TV adspend falls in favour of direct mail
  • Figure 48: Media type used by car finance specialists, year to June 2009
• Channels to Market
• Key points
• To go direct to the dealer, or to look elsewhere?
• Distribution dependent on the type of purchase
  • Figure 49: Expected source of purchase of next car, new and second-hand, December 2008
• Total number of dealers could be set to decline
• Banks are the default choice?
  • Figure 50: Likelihood of potential customers to source a loan through their current account provider, September 2008
• Physical distribution channels still important
  • Figure 51: Websites actually purchased from in the last three months (financial products only), Oct 2003-Jul 2008
• The Consumer -- Targeting Opportunities
• Key points
• New cars still key to the finance market
  • Figure 65: Car financing methods, by car ownership, June 2009
• Buying in cash to get a better deal...
• ...but what about those who can' t fund a purchase from savings?
• Taking advantage of the new economic climate
  • Figure 66: Most popular car financing methods, by consumer attitudes towards car finance, June 2009
  • Figure 67: Next most popular car financing methods, by consumer attitudes towards car finance, June 2009 (continued)
• Most are strong cash advocates
  • Figure 68: Key consumer groups, June 2009
  • Figure 69: Consumer attitudes to car finance, by target groups, June 2009
• Wheeling and dealing in the second-hand market
  • Figure 70: Car ownership, by target groups, June 2009
• Dealer dodgers are the key target market -- despite their cynicism
  • Figure 71: Car financing methods, by target groups, June 2009
• Appendix -- The Consumer -- Targeting Opportunities
  • Figure 77: Target groups, by demographics, June 2009