UK Car Finance Companies Benefitting From Market Growth

During the past two years, things have been difficult for the car finance industry. Lenders have become much stricter in approving car loans. The auto market is beginning to experience some liquidity, allowing both dealers and finance companies to experience some profitability.

Despite these positive signs, industry experts are still uncertain regarding growth outlook.

A delicate economy and increasing inflation seem to point to a base rate of between 0.5 and 1.75 percent over the next two years. Larger car finance companies are lending at four to five percent base rates, enjoying steady profit margins.

Some companies report accepting more customers for car loans, creating a strong completed deal percentage. Creditplus reported a 69 percent average increase in initial acceptance between February 2010 and 2011.

Shaun Armstrong, Creditplus managing director, stated that customers are staying in their car loans longer and the amount of bad debt is declining. Gone are the days of inexpensive money and competing solely based on market share.

Volatile fuel costs make vehicle ownership more expensive, another factor that should contribute to low interest rates during the next two years.

People are still borrowing money, despite the uncertain economy. The car finance market has experienced growth within recent months. This, combined with institutions lending more money, has stimulated market growth. More individuals are being approved for desired car loans at affordable interest rates.

Mr. Armstrong believes that the car finance market should be much steadier over the next two years, allowing dealers and lenders to make respectable profits.

Since the UK financial crisis, many consumers have increased their awareness regarding personal finances. Despite this fact, a report from Creditplus indicated that 76 percent of car loan applicants have less than two to three months of emergency savings. The low interest rate is causing saving to be unattractive.

Consumers are instead spending money to improve their lifestyles.