The United Kingdom car loan market, valued at approximately USD 62.48 billion in 2023, is experiencing significant growth and is projected to reach around USD 109.20 billion by 2032, with a compound annual growth rate (CAGR) of 6.4%. This dynamic market is influenced by several key trends and developments, which are shaping the landscape of automotive financing in the UK.

Key Takeaways

• In 2021, 2.1 million cars were financed by various loan providers in the UK.
• The average amount spent by British consumers on new car purchases was £25,000.
• Automotive financing companies projected that car loan financing could facilitate the purchase of £23 billion worth of used vehicles in 2023.

What are Car Loans?

Car loans are financial products offered by banks and other financial institutions to help consumers purchase vehicles without paying the full price upfront. Instead, the loan allows buyers to pay off the vehicle's cost over time with added interest. Ownership is typically transferred to the buyer upon the completion of these payments.

Market Drivers

The UK car loan market is primarily driven by the increasing prices of both new and used vehicles and the rising number of new vehicle launches. Additionally, banks are encouraging consumer savings by offering simple and favorable terms and conditions for loan acquisition, which further stimulates market growth.

Key Trends and Developments

Several notable trends and developments are influencing the United Kingdom car loan market:

• Greater Preference for Used Vehicles: There is a strong preference among British consumers, especially the younger population (aged 18-24), to purchase used cars over new ones.
• Multiple Car Loan Financing Options: Consumers have a variety of financing options, including hire purchase agreements and personal/guarantor loans.
• Switch Towards Four-Wheelers: Many motorcyclists and bike owners are planning to transition to four-wheel vehicles in the near future.
• Online Loan Payment Services: The convenience and flexibility of online loan payments are expected to boost market growth.

Recent Market Developments

1. January 16, 2024: London-based D2C car finance platform, Carmoola, raised £15.5 million in equity investment to revolutionize the UK car finance market.
2. September 25, 2023: Fitch Solutions reported robust demand for vehicles in the UK through 2024.
3. January 23, 2023: Metro Bank launched a digital car loan product under its RateSetter brand to offer an end-to-end digital experience to brokers and borrowers.
4. September 30, 2022: Lloyds Bank plc provided a loan of £1 million to Lex Autolease and Black Horse for manufacturing electric vehicles.

Detailed Market Trends

Greater Preference for Used Vehicles

British consumers, particularly the younger demographic, are three times more likely to purchase a used car over a brand-new vehicle. This preference is driving significant demand in the used vehicle financing sector, as more consumers seek affordable and reliable options.

Availability of Multiple Car Loan Financing Options

British consumers have access to a range of financing options, including hire purchase agreements and personal loans. These options provide flexibility and cater to diverse financial situations, making it easier for consumers to finance their vehicle purchases.

Adoption of Four-Wheelers

There is a noticeable shift among British motorcyclists and bike owners towards four-wheel vehicles. This trend is expected to continue as more individuals seek the convenience and safety of cars over motorcycles.

Online Loan Payment Services

The proliferation of digital banking services has made car loan financing more accessible. Consumers can now easily access information about car policies, interest rates, and installment sizes online, facilitating informed decision-making. The convenience and speed of online loan payments are also positively impacting market demand.

Market Segmentation

The "United Kingdom Car Loan Market Report and Forecast 2024-2032" provides a detailed analysis based on several segments:

Vehicle Type

• Passenger Vehicles
• Commercial Vehicles

Ownership

• New Vehicles
• Used Vehicles

Loan Provider

• Banks
• Original Equipment Manufacturers (OEMs)
• Non-Banking Financial Companies (NBFCs)

End User

• Individual Consumers
• Enterprises

Individual Consumers Leading the Market

Individual consumers are expected to dominate the UK car loan market in the coming years. The younger population's inclination towards used and inexpensive cars, coupled with the transition of motorcyclists to four-wheelers, is driving this trend. Additionally, the UK’s attractiveness as a business destination and the expansion of its warehousing and logistics industry are expected to boost demand for commercial vehicle financing.

Competitive Landscape

Major players in the UK car loan market are focusing on offering fair terms and conditions to attract loan seekers. Some of the key players include:

• Barclays PLC: Founded in 1690 and headquartered in London, offering consumer, corporate, and investment banking services.
• BNP Paribas S.A.: Established in 2000 in Paris, France, providing retail banking, corporate, and institutional banking services.
• Santander UK plc: Founded in 1988 in London, offering retail banking, corporate, commercial, and investment banking services.
• Lloyds Bank plc: Established in 1765 in London, offering a wide range of financial services for commercial and retail consumers.

Other notable players include Bayerische Motoren Werke AG (ALPHERA Financial Services), JBR Capital Ltd., Close Brothers Group plc, Tandem Bank Limited, Royal Bank of Scotland plc, and Nationwide Building Society.

The United Kingdom car loan market is poised for substantial growth, driven by rising vehicle prices, the increasing availability of financing options, and the convenience of digital banking services. As more consumers turn to used vehicles and digital loan solutions, the market is expected to expand significantly. With favorable economic conditions and innovative financial products, the UK car loan market will likely continue its upward trajectory, providing ample opportunities for both consumers and financial institutions.