Car Finance - UK - December 2007

Table of Contents

• Issues in the Market
• Key issues
• Abbreviations
• Market in Brief
• Car finance -- a rate sensitive market
• Figure 1: Value and volume of the car finance market, 2001-07
• An uncertain outlook
• Polarisation in consumer credit quality
• Withdrawal of some direct lenders
• Car dealers need profit, finance companies need penetration
• More product innovation required
• Unsecured lenders start worrying about rising debts
• An opportunity for car manufacturers and dealers?
• Used cars -- a missed opportunity
• Internal Market Environment
• Key Points Summary
• Cars -- a depreciating asset
• Rising number of cars on the road
  • Figure 2: Number of cars in use (car parc) in the UK, 2001-07
  • Figure 3: Cars in use (car parc), 2001-07
• New car registrations
  • Figure 4: Trend in private, business and fleet new car registrations, 2001-07
• Used car sales
  • Figure 5: Used car sales, 2001-07
  • Figure 6: Retail new and used car sales (units), 2001-07
• Over-production, residual values and nearly-new cars
• Part exchange and the funding gap
• Car pricing and car finance
• Discounted manufacturer finance
• Captive finance market
• Rate headlining
  • Figure 7: Actual personal loan rates paid compared with advertised rates, Feb-June 2005
  • Figure 8: Direct lender personal loan headline APR rates, 13 November 2007
• Changes to the Consumer Credit Act
• Treating customers fairly
• Broader Market Environment
• Key Points Summary
• GDP, consumer expenditure and savings
  • Figure 9: Forecast economic indicators, 2007-12
  • Figure 10: Comparison of trend in new car sales and interest rates, 2001-07
• Rising debt levels
  • Figure 11: Consumer credit outstanding and secured borrowings, 1997-2006
• The increasing burden of debt
  • Figure 12: Degree to which consumers are able to cope with bills and credit commitments, 2007
• The distribution of debt
  • Figure 13: Percentages of households with secured and unsecured debt, 1995-2006
• Attitudes towards debt and further borrowing
  • Figure 14: Attitudes towards current and future borrowing, 2005 and 2007
  • Figure 15: Attitudes towards current and future borrowing, by gender, age and socio-economic group, March 2007
• Changing consumer attitudes towards debt
  • Figure 16: Agreement with selected financial lifestyle statements, 1993-2006
• Number of IVAs rises sharply
• Confidence linked to interest rates
  • Figure 17: Bank base rate and consumer confidence, 1982-2007
• Sub-prime threat to motor finance
• Decline in acceptance rates
• Competitive Context
• Key Points Summary
• Car purchasing methods
  • Figure 18: Car financing, July 2007
• Remortgaging and mortgage equity release
  • Figure 19: Reasons for releasing equity, February 2007
• Secured lending
  • Figure 20: Reasons for taking out a secured loan, December 2006
• Cash savings and investment products
  • Figure 21: Individual trusts' private sector holding of Sterling assets, 2001-05
  • Figure 22: Current account and savings product ownership, October 2006
  • Figure 23: Savings product ownership, by gender, age and socio-economic group, October 2006
• Strengths and Weaknesses in the Market
• Strengths
• Weaknesses
• Market Size and Forecast
• Key Points Summary
• How cars are financed
  • Figure 25: Car financing method by new and second-hand car ownership, July 2007
• Total car finance market worth £30.8 billionFigure 26: Car finance market size by value and volume, 2001-07
  • Figure 27: Car finance market average agreement value, 2001-07
  • Figure 28: Comparison of trend in car finance agreements and interest rates, 2001-07
• Market segmentation
• Car dealer finance
  • Figure 29: Car dealer finance market size by value and volume, 2001-07
  • Figure 30: Car dealer finance average agreement value, 2001-07
• Direct lending -- secured and unsecured finance for car purchasing
  • Figure 31: Direct lending car purchase finance (secured and unsecured) market size by value and volume, 2001-07
  • Figure 32: Direct lending car purchase finance (secured and unsecured) average agreement value, 2001-07
• The balance is shifting
  • Figure 33: Proportion of car finance agreements/transactions accounted for by secured and unsecured lending, 2007
• Unsecured finance products
• Secured finance products
• Finance penetration
  • Figure 34: Trend in private, business and fleet new car registrations and finance penetration, 2001-07
• Forecast
• Market set to stagnate over the next five years
  • Figure 35: Forecast car finance market segments and total Car finance market, 2001-2012
• Factors used in the forecast
• Segment Performance
• Key Points Summary
• Share of market volume
  • Figure 36: Market share of dealer finance and other lending for car purchases (number of agreements), 2001-07
• Share of market value
  • Figure 37: Market share of dealer finance and other lending for car purchases (market value), 2001-07
• Market Share
• Key Points Summary
• Personal loans
  • Figure 38: Personal loan market share by company, August 2007
• The ' big five' cater for half of the market
• Car dealer finance
  • Figure 39: Estimated manufacturer and independent finance company share of new and used car finance market (number of cars financed), 2007
• New car finance
  • Figure 40: Estimated finance company brand shares of the new car finance market (unit sales), 2007
• Used car finance
  • Figure 41: Estimated finance company brand shares of the used car finance market (unit sales), 2007
• Companies and Products
• Key Points Summary
• Vehicle manufacturer finance companies
• FCE Bank plc
• GMAC Financial Services
  • Figure 42: GMAC' s retail car finance products, by vehicle brand, 2007
• Volk Volkswagen Financial Services (UK)
• Other leading players
• Independent motor finance companies
• Black Horse Motor Finance
• Capital Bank Motor
• GE Money Motor Finance
• Direct lenders
• High street banks
  • Figure 43: Top five major British banking groups and selected subsidiaries, 2006
• Recent entrants
• Market developments
• Brand Communication and Promotion
• Key Points Summary
• Overall personal loan adspend
  • Figure 44: Personal loan adspend, 2003-07
• Vauxhall top the list of advertisers
  • Figure 45: Car manufacturer finance adspend, 2003-07
• Contract plan adspend slumps
  • Figure 46: Personal Contract Plans adspend, 2003-07
• TV the key medium
  • Figure 47: Media types used (personal contract plans and car manufacturer finance), year to June 2007
• Channels to Market
• Key Points Summary
• Larger number of outlets for unsecured personal loans
  • Figure 48: Number of outlets for car finance and personal loans, 2007
• Growing use of Internet for personal loans
  • Figure 49: Use of remote channels in arranging a loan, 2005 and 2006
• The Consumer -- Car Ownership and Financing
• Key Points Summary
• Car ownership
  • Figure 50: Car ownership, July 2007
  • Figure 51: Car ownership, by gender, age, socio-economic group and marital status, July 2007
• Treating yourself to a new car
  • Figure 52: Car ownership, by lifestage, special group, working status and gross annual household income, July 2007
• Londoners letting the train take the strain
  • Figure 53: Car ownership, by TV region, technology usage, Internet usage and newspaper readership, July 2007
• A discount for cash?
  • Figure 54: Car financing methods, July 2007
• Money goes to money
  • Figure 55: Car financing, by gender, age, socio-economic group and marital status, July 2007
• Cash popular at the margins
  • Figure 56: Car financing, by lifestage, special group, working status and gross annual household income, July 2007
• Retirees driving the South West' s cash market?
  • Figure 57: Car financing, by TV region, technology usage, Internet usage and newspaper readership, July 2007
  • Figure 58: Car financing method, by new and second-hand car ownership, July 2007
• The Consumer -- Key Product Features
• Key Point Summary
• Reluctance to turn to finance
  • Figure 59: Important features of finance arrangement/borrowing for car purchase, July 2007
• Traditional attitudes live on
  • Figure 60: Important features of finance arrangement/borrowing for car purchase, by gender, age, socio-economic group and marital status, July 2007
• Pre-family look for predictability
  • Figure 61: Important features of finance arrangement/borrowing for car purchase, by lifestage, special group, working status and gross annual household income, July 2007
• Internet users -- picking and choosing
  • Figure 62: Important features of finance arrangement/borrowing for car purchase by TV region, technology usage, Internet usage and newspaper readership, July 2007
• Paying more interest to the rates
  • Figure 63: Important features of car finance by new, second-hand and intended car ownership, July 2007