New research from U.K.-based automotive marketplace Auto Trader reveals that finance penetration rates for new and used cars are slowing but rising annual percentage rates (APRs) are only having a limited impact on engagement.
The company’s market intelligence report for June shows that the share of new cars sold on finance decreased from 84% in 2022 to 77% in March this year. Used-car finance penetration dropped from 53% in 2022 to 49% over the same period.
Average APRs for used-car finance increased to 11.5% while the average for new cars went up to 8.4%. Overall, monthly payments on used cars have been driven up in recent months by higher APRs and rising car prices. There has also been a rise in the number of interactions with used-car finance calculators as buyers look for the best available deals.
“Given the growing squeeze on household finances, the rising interest rates are a concern, but we’re seeing very little direct impact on demand for finance,” said Rachael Jones, director of automotive finance at Auto Trader.
“On our marketplace, the growth in rates is having no effect on consumer demand. With average used-car prices up around £3,500 in just two years, more drivers than ever are considering finance to help fund their next car, with the number of people using our finance calculators increasing 15% on last year.”
The report revealed used-car demand was up by 2% year-on-year, partly due to constrained supply, which dropped by 4% in June. Used-car sales increased by 3% year on year and used-car retail prices went up by 3.2%, the 39th consecutive month of growth, because of strong price movements on older cars due to higher demand.
Auto Trader attracted 466 million visits in H1 2023, an 11% hike versus June 2022.
The report drew on data from the Society of Motor Manufacturers and Traders (SMMT), the DVLA and the Finance and Leasing Association.
On June 1, Auto Trader published its FY 2022 financial results, which showed another strong performance in which revenue increased by 16% from £433 million to £500 million ($620 million U.S.), although pre-tax profit dropped by 2%.