Rachael Jones, Director of Automotive Finance at Auto Trader, the UK’s largest online automotive marketplace, commented on the rise: “Given the growing squeeze on household finances, the rising interest rates are a concern, but it’s important to remember that unlike a tracker mortgage, car finance is always a fixed monthly cost. It means that in-contract drivers don’t have to worry about base rate increases impacting their monthly outgoings.

“And for those looking to buy a new or second-hand car on finance, it’s also worth putting the increase into context in terms of monthly payments. While the recent increase in interest may well add several hundred pounds to the average mortgage each month, compared to last year, the average used car has only seen an £8 a month rise due to rising interest rates.¹

“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 set of wheels. Despite the current average second-hand car APR reaching 11.4%, the number of people using our finance calculators has increased 15% on last year.”

1. £8 monthly payment increase on a 4-year PCP deal, based on ATs average vehicle price of £17,000. Interest rates based on the average used car APRs seen on Auto Trader’s used car finance calculators across all lenders on the platform. Calculation includes £1,000 deposit, annual mileage of 10,000 and a 48-month term based on 9.6% in June 2022 and 11.4% in June 2023.