FLA New Logo 2017

The latest figures from the Finance & Leasing Association (FLA) show that total asset finance new business by FLA members fell to £2.662 billion in September this year, an 11% drop compared with the same month in 2019.

Furthermore, in the 12 months leading up to September new business was 21% lower than in the same period the year before.

Breaking the results down by asset-type, IT equipment finance saw the greatest plummet in new business during the period; falling to £221 million, a 29% drop compared to the same month in 2019. However, in the 12 months leading up to September 2020, IT equipment finance was the only sector to see a growth to £2.719 billion, a rise of 2%.

Kilkelly geraldine 400 

Geraldine Kilkelly (pictured above), head of research and chief economist at the FLA, explained: “The asset finance market has gradually returned to more normal levels of new business, with the easing of the rate of contraction continuing in September.”

New business (£m)Sep 2020% change on prev. year12 months to Sep% change on prev. year
Plant and machinery finance 496  -20 6,070 -19
Commercial vehicle finance 729  -2 7,077 -24
IT equipment finance 221  -29 2,719 2
Business equipment finance 173  -4 1,869 -22
Car finance 811  3 7,491 -25
Total FLA asset finance 2,662  -11 28,246 -21

In the figurework, the FLA noted that the vehicle finance sectors fared better in September following the release of a new registration plate. For example, the car finance sector fared the best in September, witnessing a 3% growth in new business compared to the previous year, rising to £811 million.

However, this is in stark contrast to the Society of Motor Manufacturers & Traders’ (SMMT) figurework regarding new car registrations in September this year, stating that they had fallen by 4.4% compared to the same month in 2019, with only 328,041 passenger cars hitting the roads. This marked the worst September for new car registrations since the UK adopted a two-plate system in 1999.

The SMMT’s figures showed a decline of 15.8% on the 10-year September average, and a 33.2% fall in UK registrations this year-to-date, equalling a 615,000-unit shortfall.

dally adrian new pic 

Illustrating that the broader finance industry is not yet in the clear, Adrian Dally, head of motor finance at the FLA, commented: “With the effects of the first lockdown still being felt, and new restrictions still being announced, it’s not surprising that September did not see a return to the usual brisk trade in new cars.”

According to additional figurework from the FLA for September 2020, the consumer car finance market reported growth in new business volumes of 7% compared with the same month in 2019. Furthermore, in the first nine months of 2020, new business volumes were 22% lower than in the same period in 2019.

Consumer new car finance

Breaking this down into new and used car segments; the consumer new car finance market reported new business volumes had risen by 5% in September 2020 compared with the same month in the year before.

The figures show that 732,842 cars were financed in the 12 months leading up to September 2020, marking a 22% decline compared to the previous year. This equated to a £16.12 billion value of advances, resulting in an 18% drop on the 2019’s figures for the same period.

According to the FLA, the percentage of private new car sales financed by its members in the twelve months to September 2020 reached 94.5%, the second highest annual penetration rate on record.

Consumer used car finance

The consumer used car finance market reported growth in new business volumes of 9% in September 2020 compared with the same month in 2019. In the nine months to September 2020, new business volumes in this market fell by 19% compared with the same period in the previous year.

Kilkelly added: “The below figures show that the consumer car finance market has played a significant role in the UK’s economic recovery following the easing of the first lockdown restrictions in June.”

Cars bought on finance by consumers through the point of sale

New businessSep 2020% change on prev. year12 months to Sep 2020% change on prev. year
New cars
Value of advances (£m) 2,898  9 16,120 -18
Number of cars  128,345 5 732,842 -22
Used cars  
Value of advances (£m)  1,854 13 16,302 -11
Number of cars  140,347 9 1,269,983 -14
Total cars 
Value of advances (£m)  4,752 11 32,421 -14
Number of cars  268,692 7 2,002,825 -17

Cars bought on finance by businesses

New businessSep 2020% change on prev. year12 months to Sep 2020% change on prev. year
New cars
Number of cars  27,098 -9 281,778 -35
Used cars  
Number of cars  4,552 16 55,984 -7

UK used car sales halve to 1 million in Q2

In addition to this revelation from the FLA, the SMMT have also recently released its figurework for UK used car market in Q2 2020, illustrating a 48.9% drop to just 1,039,303 transactions. In August 2020, the SMMTs year-to-date sales were down 28.7%, with 85% of 2020 losses so far recorded in Q2.

UK used car transactions: Q2 2020 and % change on 2019

 Q2 2020Q2 2019% changeYear-to-date 2020Year-to-date 2019% change
Used cars  1,039,303  2,034,236  -48.9%  2,891,222  4,054,380  -28.7%

The pace of decline eased as Q2 unfolded, from a peak year-on-year loss of 74.2% in April to a 17.5% loss in June, as private sellers and buyers got back on the move.

Mike Hawes, chief executive of the SMMT, said: “As devastating as these figures are, with full lockdown measures in place for the whole of April and May, they are not surprising. Once the UK starts to get back on the move again in December, we expect to see more activity return to the market, as cars are a safe and reliable way to travel during the pandemic. However, if we’re to re-energise sales and the fleet renewal needed to drive environmental gains, support will be needed for the broader economy in order to bolster business and consumer confidence.”

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