Motor Finance

Market Assessment 2008 Third Edition June 2008

Publication Date	June 2008
Publisher	Key Note
Product Type	Report
Pages	151
ISBN Number	not applicable
Product Code	KEY00070

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Summary

This report provides an overview and analysis of the motor finance market in the UK and focuses on car purchases by private buyers. The market is divided into two main sectors - the new- and used-car markets - and four main types of lender: finance companies; manufacturers; subprime lenders; and aggregators. Various types of finance are available to car buyers, including: personal loans, hire purchase (HP) and personal contract plans (PCPs).

The motor finance market in the UK is highly competitive; no single company dominates the sector. Consumers are able to arrange their finance through a range of sources, including the subsidiaries of banks and building societies, the finance sections of leading retailers and motor manufacturing companies, and a variety of independent firms, ranging from financial companies that specialise in loans for car purchase to the leading supermarkets (such as Tesco and Sainsbury's).

The finances of households in the UK are being squeezed as banks and building societies cut mortgage lending and increase interest rates.

Credit conditions are also being tightened and a host of lenders have withdrawn products, suspended lending or closed their doors to borrowers.

The squeeze could intensify further in 2008, with additional interest-rate increases imposed by the lenders and a further reduction in available credit.

Secured credit is likely to be affected by this tightening and unsecured lending - i.e. via credit cards and overdrafts - is also likely to be hit.

These lending conditions have implications for the motor finance sector.

Exclusive primary research undertaken for this report into consumer attitudes towards motor finance indicated that a significant proportion of consumers expected that obtaining finance to purchase a car would now be more difficult because of the current credit crisis. The survey also found that some consumers now expect to defer buying a new car because of the current credit crisis.

The UK economy is facing a period of economic uncertainty in 2008 that includes declining consumer confidence, projected falls in the number of new-car registrations, the higher costs of taking out personal loans and the anticipated reductions in the amount of money that consumers are willing to spend on cars. In line with these projections, Key Note expects that the value of new motor finance in the UK could be adversely affected in 2008 and possibly stay fairly subdued in 2009. The strength of the market after 2009, and up to 2012, will depend to a large extent on an improvement in the general economic climate, an increase in consumer confidence, an easing of credit restrictions, lower interest rates and a more buoyant new-car registration market.

Content

Executive Summary
1. Introduction
- Background
- Original Consumer Research
2. Strategic Overview
- Market Dynamics and Segmentation
- Economic Trends
- Gross Domestic Product
- Table 1: UK Gross Domestic Product at Current and Annual Chain-Linked
- Prices (m), 2003-2007
- Inflation
- Table 2: UK Rate of Inflation (%), 2003-2007
- Population
- Table 3: UK Resident Population Estimates by Sex (000), Mid-Years 2003-2007
- Unemployment
- Table 4: Actual Number of Unemployed Persons (Million), 2003-2007
- Household Disposable Income
- Table 5: Household Disposable Income per Capita (), 2003-2007
- New- and Used-Car Sales Trends
- New-Car Registrations
- Table 6: Number of New-Car Registrations in The UK (000 and %),
- Years Ending December 2003-2007
- Table 7: Number of New-Car Registrations in The UK by Sector (000 and %),
- Years Ending December 2003-2007
- Used-Car Sales
- Table 8: Annual Totals of Used-Car Sales in Great Britain (000),
- Years Ending December 2003-2007
- Retail Sales of Motor Vehicles
- Table 9: Retail Sales of Motor Vehicles in The UK (m), 2003-2007
- Motor Vehicle Prices
- Table 10: Retail Price Index for The Purchase of Motor Vehicles
- and for All Items (1987=100), 2003-2007
- Motor Finance Contents
- Key Note Ltd 2008
- Number of Licensed Cars in Great Britain
- Table 11: Number of Private Cars Licensed in Great Britain (000),
- Years Ending December 2002-2006
- Table 12: Age of Licensed Motor Vehicles in Great Britain by Year of First
- Registration (000 and %), Years Ending December 1980-2006
- Costs of Motoring
- Table 13: Annual Costs of Running A Car (), June 2006 and 2007
- Payment for Cars in Cash
- Market Size
- Table 14: New Business for Motor Finance in The UK by Value (m),
- Years Ending December 2003-2007
- Table 15: New Business for Motor Finance for New Cars by Method
- of Purchase by Value (m and %), Years Ending December 2003-2007
- Table 16: New Business for Motor Finance for Used Cars by Method
- of Purchase by Value (m and %), Years Ending December 2003-2007
- Distribution
- Regional Distribution
- Table 17: Number of UK Vat-Based Enterprises Engaged in The Sale
- of Motor Vehicles by Government Regional Office (Number and %), 2007
- Cars Licensed by Region
- Table 18: Cars Licensed in 2006 by Average Age of Car, Percentage First
- Registered in 2006 and by Government Regional Office in Great Britain
- (000, % and Years), Year Ending 2006
- Number of Financial Institutions
- Table 19: Number of Vat-Based Enterprises Engaged as Banks and Building
- Societies, and in Other Forms of Financial Mediation by Government
- Regional Office (Number and %), 2007
- Competitive Structure
- Finance Companies
- Manufacturers
- Subprime Lenders
- Aggregators
- Advertising
- Table 20: Main Media Advertising Expenditure on Secured and Unsecured
- Personal Loans (000), Years Ending December 2003-2007
- The Consumer
- Table 21: The Total Amounts of Lending Outstanding by Individual
- Borrowers at Year End (m), 2003-2007
- Market Forecasts
- Table 22: Forecast New Business for Motor Finance in The UK by Value (m), 2008-2012
3. New Cars
- Background
- Market Size
- Table 23: New Business for Motor Finance for New Cars in The UK by Value
- (m), Years Ending December 2003-2007
- Table 24: New Business for Motor Finance for New Cars by Method
- of Purchase by Value (m), Years Ending December 2003-2007
- New-Car Registrations
- Table 25: New Registrations of Cars in The UK by Origin of Vehicle
- (Number and %), 2003-2007
- Major Suppliers
- Manufacturers
- Table 26: Selected Leading UK-Registered Motor-Vehicle Manufacturers
- by Turnover and Pre-Tax Profit (m), 2006/2007
- Table 27: New Registrations of Cars in The UK by Manufacturer
- (Number and %), Years Ending December 2006 and 2007
- Table 28: New Registrations of Cars in The UK The Top Ten Models
- (Number and %), Years Ending December 2006 and 2007
- Consumer Trends
- Table 29: Intention to Buy A Car in The next 12 Months by Type
- (% of Respondents), 2007
- Marketing Activity
- Advertising
- Car Manufacturers
- Table 30: Main Media Advertising Expenditure by Car Manufacturers
- (000 and %), Year Ending December 2007
- Car Dealers
- Table 31: Main Media Advertising Expenditure by Motor Dealers (000),
- Year Ending December 2007
- Distribution
- Table 32: Selected Leading UK-Registered Motor Dealerships by Turnover
- and Pre-Tax Profit (m), 2006/2007
4. Used Cars
- Background
- Market Size
- Table 33: New Business for Motor Finance for Used Cars in The UK by Value
- (m and %), Years Ending December 2003-2007
- Table 34: New Business for Motor Finance for Used Cars by Method
- of Purchase by Value (m), Years Ending December 2003-2007
- Major Suppliers
- Table 35: New Registrations of Cars in The UK Private and Non-Private (%),
- Years Ending December 2003-2007
- The Most Popular Models
- Table 36: Top Ten Used-Car Sales (Number and %), 2007
- Consumer Trends
- Marketing Activity
- Advertising
- Distribution
5. Personal Loans
- Background
- Market Size
- Table 37: Personal Loans to Finance New-Car Purchases in The UK
- by Value (m), Years Ending December 2003-2007
- Table 38: Personal Loans to Finance Used-Car Purchases in The UK by Value (m),
- Years Ending December 2003-2007
- Major Suppliers
- Consumer Trends
- Marketing Activity
- Advertising
- Table 39: Main Media Advertising Expenditure on Secured Personal
- Loans (000), Year Ending December 2007
- Table 40: Main Media Advertising Expenditure on Unsecured Personal
- Loans (000), Year Ending December 2007
- Distribution
6. Hire Purchase
- Background
- Market Size
- Table 41: Hire Purchase to Finance New-Car Purchases in The UK by Value
- (m), Years Ending December 2003-2007
- Table 42: Hire Purchase to Finance Used-Car Purchases in The UK by Value
- (m), Years Ending December 2003-2007
- Major Suppliers
- Consumer Trends
- Marketing Activity
- Advertising
- Distribution
7. Personal Contract Plans
- Background
- Market Size
- Table 43: Personal Contract Plans to Finance New-Car Purchases
- in The UK by Value (m), Years Ending December 2003-2007
- Table 44: Personal Contract Plans to Finance Used-Car Purchases
- in The UK by Value (m), Years Ending December 2003-2007
- Major Suppliers
- Consumer Trends
- Marketing Activity
- Advertising
- Table 45: Main Media Advertising Expenditure on Personal Contract Plans
- Cars (000), Year Ending December 2007
- Distribution
8. An International Perspective
- Global Production of Motor Vehicles
- Table 46: Global Production of Motor Vehicles by Country by Volume
- (Number and %), 2006 and 2007
- The Worlds Leading Motor Manufacturers
- Table 47: Global Production of Motor Vehicles by Manufacturer by Volume
- (Number and %), 2006
- Motor Vehicles in Use
- Cars in Use Global Statistics
- Table 48: Number of Motor Vehicles in Use in The World by Country
- (Million and %), 2005
- The US Market
- Table 49: New Vehicle Registrations in The US through
- Franchised Dealers (000), 2003-2007
- Table 50: New- and Used-Car Loans by US Auto Finance Companies
- by Interest Rates, Maturity, Loan-to-Value Ratio and Amount
- Financed (%, Months and $), 2003-2007
- Table 51: New-Car Loans by US Commercial Banks by Interest Rates
- and Maturity (% and Months), 2003-2007
- The European Market
- Table 52: New Passenger Car Registrations in Europe
- (Number and %), 2006 and 2007
- The Japanese Market
- Table 53: Number of New Vehicle Registrations in Japan (000), 2002-2007
- Table 54: Number of Used-Vehicle Sales in Japan
- by Type of Vehicle (000), 2002-2006
9. Pest Analysis
- Political Factors
- Major Shake-up in Personal Insolvency Laws
- Personal Payment Protection Is Referred to The Competition Commission
- Consumer Credit Directive
- Unfair Commercial Practices Directive
- Treating Customers Fairly
- Economic Factors
- Government Increases Vehicle-Excise Duty on High Carbon-Emitting Cars
- Royal Bank of Scotland Expects Motor Premiums to Continue
- Rising in 2008
- Dealers Struggling to Sell Finance
- Dealer Finance May Benefit from The Credit Crunch
- Motor Finance Competence Test Is Launched
- Social Factors
- Fewer People Planning to Buy A Car in 2008
- The Rising Cost of Unsecured Loans
- Cars Crushed in Tax Swoop
- Technological Factors
- Financial Text Service for Dealerships
- New Tool for Faster Leasing Proposals
- Clampdown on Vehicle Theft Though Fraud
10. Consumer Dynamics
- Introduction
- Table 55: Drivers or Owners of A Car (% of Respondents Who Drive
- or Have A Car), 2008
- Summary of Survey Results
- Table 56: Summary of Survey Results (% of Respondents Who Drive or Have A Car), 2008
- Replacing next Car
- I Expect to Replace My Car in The next 12 Months (S1)
- Table 57: Expectation to Replace Car in The next 12 Months
- (% of Respondents Who Drive or Have A Car), 2008
- Financing next Car
- The next Time I Buy A Car, I Will Pay for IT Outright in Cash (S2)
- Table 58: Expectation to Purchase next Car Outright in Cash
- (% of Respondents Who Drive or Have A Car), 2008
- I Expect to Finance My next Car through A Loan from My Bank (S3)
- Table 59: Expectation to Finance next Car through A Bank Loan
- (% of Respondents Who Drive or Have A Car), 2008
- I Expect to Finance My next Car through A Loan Arranged
- through A Car Dealer (S4)
- Table 60: Expectation to Finance next Car through A Loan Arranged through
- A Car Dealer (% of Respondents Who Drive or Have A Car), 2008
- I Expect to Finance My next Car through A Car Manufacturer Direct (S5)
- Table 61: Expectation to Finance next Car through A Car Manufacturer
- Direct (% of Respondents Who Drive or Have A Car), 2008
- I Expect to Finance My next Car through My Credit Card (S6)
- Table 62: Expectation to Finance next Car through A Credit Card
- (% of Respondents Who Drive or Have A Car), 2008
- I Expect to Finance My next Car through Finance Arranged Online (S7)
- Table 63: Expectation to Finance next Car through Finance Arranged
- Online (% of Respondents Who Drive or Have A Car), 2008
- Other Attitudes towards Motor Finance
- I Expect That Obtaining Finance to Purchase A Car Will Be More
- Difficult than in The past Because of The Current Credit Crisis (S8)
- Table 64: Expectation That Obtaining Finance to Purchase A Car Will Be More
- Difficult than in The past Because of The Current Credit Crisis
- (% of Respondents Who Drive or Have A Car), 2008
- I Will Defer Buying A New Car until Later Because of The Current Credit Crisis (S9)
- Table 65: Expectation to Defer Buying A New Car until Later Because of The Current
- Credit Crisis (% of Respondents Who Drive or Have A Car), 2008
11. Company Profiles
- Introduction
- Aa Ltd
- Corporate Strategy
- Advertising
- Distribution
- Profitability
- Table 66: Financial Results for Aa Ltd (m),
- Years Ending 31st December 2004-2006
- Future Company Developments
- Alliance & Leicester Plc
- Corporate Strategy
- Advertising
- Distribution
- Profitability
- Table 67: Financial Results for Alliance & Leicester Plc (m),
- Years Ending 31st December 2005-2007
- Future Company Developments
- Barclays Plc
- Corporate Strategy
- Advertising
- Distribution
- Profitability
- Table 68: Financial Results for Barclays Plc (m),
- Years Ending 31st December 2005-2007
- Future Company Developments
- Fce Bank Plc
- Corporate Strategy
- Advertising
- Distribution
- Profitability
- Table 69: Financial Results for Fce Bank Plc (m),
- Years Ending 31st December 2005-2007
- Future Company Developments
- Ge Capital Woodchester Ltd
- Corporate Strategy
- Advertising
- Distribution
- Profitability
- Table 70: Financial Results for Ge Capital Woodchester Ltd (m),
- Years Ending 31st December 2004-2006
- Future Company Developments
- Gmac Commercial Finance Plc
- Corporate Strategy
- Advertising
- Distribution
- Profitability
- Table 71: Financial Results for Gmac Commercial Finance Plc (m),
- Years Ending 31st December 2004-2006
- Future Company Developments
- Hbos Plc
- Corporate Strategy
- Advertising
- Distribution
- Profitability
- Table 72: Financial Results for Hbos Plc (m),
- Years Ending 31st December 2005-2007
- Future Company Developments
- Hsbc Holdings Plc
- Corporate Strategy
- Advertising
- Distribution
- Profitability
- Table 73: Financial Results for Hsbc Holdings Plc ($M),
- Years Ending 31st December 2005-2007
- Future Company Developments
- Lloyds Tsb Group Plc
- Corporate Strategy
- Advertising
- Distribution
- Profitability
- Table 74: Financial Results for Lloyds Tsb Group Plc
- (m), Years Ending 31st December 2005-2007
- Future Company Developments
- Nationwide Building Society
- Corporate Strategy
- Advertising
- Distribution
- Profitability
- Future Company Developments
- The Royal Bank of Scotland Plc
- Corporate Strategy
- Advertising
- Distribution
- Profitability
- Table 75: Financial Results for The Royal Bank of Scotland Plc (m),
- Years Ending 31st December 2004-2006
- Future Company Developments
12. The Future
- The Economy
- Table 76: Forecast UK Growth in Gross Domestic Product
- in Real Terms (%), 2008-2012
- Table 77: Forecast UK Rate of Inflation (%), 2008-2012
- Table 78: Forecast Actual Number of Unemployed Persons (Millions), 2008-2012
- Table 79: Forecast UK Resident Population by Sex (000), Mid-Years 2008-2012
- Consumer Confidence Falls
- Sainsburys Finance Predicts Slump in Car Sales
- New-Car Registrations Forecast to Fall in 2008
- Governments Vehicle Excise Duty Reforms Could Affect Vehicle Sales
- Corporate Activity
- Forecasts 2008 to 2012
- Table 80: Forecast New Business for Motor Finance in The UK by Value (m), 2008-2012
13. Further Sources
- Associations
- Publications
- General Sources
- Government Sources
- Other Sources
- Bisnode Sources
- Understanding Tgi Data
- Number, Profile, Penetration
- Social Grade
- Standard Region
- Key Note Research