Creative auto finance solutions in time for September sales bonanza

Lenders are developing new solutions to support new and used car sales

Innovative automotive finance companies have developed new financial products to support customers, as the industry awaits the new and used car sales bonanza triggered by the September number plate change.

September is traditionally one of the UK’s highest-volume months, and while its importance in the eyes of new car buyers may be waning, it remains a key measure of sales performance for manufacturers.

The UK new car market recorded its ninth consecutive month of growth in August, up 13.7% year-on-year to 94,236 units, according to the Society of Motor Manufacturers and Traders (SMMT), and a significant proportion of those sales required finance.

New research by Codeweavers found that 41.3% of UK respondents used finance to purchase their most recent vehicle, whereas 51% purchased outright. The study highlighted the continued importance of vehicle ownership among motorists, as well as the potential to convert more to finance – more than two-thirds (67.6%) said they would consider using finance in future. The research also found buyers increasingly expect transparent pricing, seamless online-to-dealer experiences and finance information that is easy to understand before making a commitment. Importantly for dealers, car buyers don’t separate the finance experience from the retail experience.

But motor finance is not always structured to meet the needs of customers, according to the lender Finclusion, which has partnered with haboo money to create a more flexible digital repayment schedule for customers. The companies say a fixed monthly repayment date does not reflect the reality of how many people are paid or manage their money today. Their new partnership will enable customers to align their repayments more closely with their income patterns, including making payments weekly, fortnightly or in smaller amounts throughout the month. The approach is particularly useful to customers who are self-employed, receive irregular income or earn from multiple sources.

Meanwhile, Triple Point has arranged a Shariah-compliant ijara-based facility of up to £75 million for Islamic car finance fintech Ayan Capital. Islamic finance prohibits the payment or receipt of interest and requires financing to be linked to underlying assets. FCA-authorised Ayan operates an ijara-based financing model, under which it purchases and retains ownership of the vehicle during the rental term. Customers make fixed monthly rental payments agreed at the outset, and Ayan assumes the risks associated with vehicle ownership.

Customer finance options are the most common use case of artificial intelligence in the UK motor trade, according to research by Close Brothers Motor Finance, with 65% of dealers now using AI tools.

Dealers and risk committees will need every tool available to contend with the potential outcomes of the Government’s review of the Zero Emission Vehicle (ZEV) Mandate. The review has been brought forward due to pressure from manufacturers that are facing extreme pressure to meet their mandate targets.

The Government insists the 2030 and 2035 respective end goals for ICE and hybrid powertrains are set in stone, but its review could change the annual ZEV sales trajectory, slowing EV uptake and potentially sending negative signals about the technology to the used car market at a time when EV residual values have started to stabilise.