Interest rate rise | November 2022
When the Bank of England last put up interest rates we did not see a sudden hike in the cost of car finance, although we are continuously monitoring any changes. What we are seeing on our platform is that new car APRs have risen much faster (+3.3% YoY) than used car APRs which have moved much more modestly (+1.4% YoY).
“Finance has historically been a key driver of new car sales, accounting for around 9 in 10 of all new car sales, but we’ve seen strong growth in used car finance this year too, accounting for almost 45% of sales. No doubt this is explained by the fact that average used car prices are now +47% on pre-pandemic levels. Finance searches have never been so high on Auto Trader with search volume up 43% on pre-pandemic levels and up 8% compared with the highs of 2021, showing that many people are looking to spread the cost as budgets are tightened.
It’s worth flagging that consumers already in finance agreements won’t see any increases until the end of their contract so will be shielded, at least for now, from the immediate effects of these rises.”
When you look at overall consumer engagement on site, advert views are 17% ahead of the same time in 2019, so while demand will no doubt end up softening as a result of cost-of-living pressures, for now cars are not falling into the type of discretionary basket of goods that are easier to cut, and first to go.”
For the millions of car owners in the UK, the ongoing surge in the values of used cars means the vehicle sitting on their driveway could be worth considerably more than they think, in many cases, more than they originally paid for it. Which means that those in the market for a new or used car could use this increased value to shield themselves from some of the effects of higher prices and interest rates.”
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