Press release

Auto Trader refutes car finance bubble claims

Auto Trader’s Market Report reveals that motor finance will be key to fueling the used car market in 2018 and beyond.

  • Finance bubble far from burst, with used car finance penetration predicted to reach 40% by 2023
  • Auto Trader says retailers missing ‘huge’ opportunity to benefit from growing consumer propensity for finance
  • Sales of new generation diesel vehicles harmed by anti-diesel rhetoric, says Auto Trader

London, Thursday 1st March The car market faces a twin assault caused by misunderstandings about car finance and the environmental performance of new vehicles.

That’s the key finding of a new report today from Auto Trader, the UK’s largest automotive marketplace for new and used cars.

The latest Market Report addresses common misconceptions that surround the car finance market, and seeks to correct misplaced comparisons with the housing market, sub-prime consumer lending in the US, and other forms of consumer credit. The Report spoke to 4,000 consumers and includes data and insights from Auto Trader’s marketplace, which hosts an average of 55 million cross platform visits from car buyers each month.

82% of drivers who had recently bought a car on finance said the final purchase was either within or below their initial budget, and the seriousness with which consumers take the repayment of car finance supports the view held by the Governor of the Bank of England, Mark Carney, who has noted in the past that car finance repayments are unlike most products bought on credit given the fundamental role that the car continues to play in people’s lives.

The growing cynical view in the City that car finance is a credit bubble waiting to burst is simply not warranted says Auto Trader.

Auto Trader CFO & COO, Nathan Coe, said: “Finance is not only crucial for new and used car sales generally, but it holds the key to cleaner motoring in the UK. The cleanest are also the most expensive. We need car financing to thrive if more people are going to switch to electric and hybrid vehicles.

“59% cent of recent car buyers who did not choose an electric vehicle said it was due to the upfront cost, yet with no increase in grants by the UK Government and prices for new electric cars rising, it’s hard to see how electric adoption can be accelerated in the UK without finance playing a pivotal role.

“It is crucial that the issue of car finance is fully understood and that these misunderstandings are addressed, given that financing of the car market is so important for the economy and for the livelihoods of UK car buyers.”

A year of used, driven by finance

The Report also highlights the increased role finance will play in growing the second-hand car market. Auto Trader predicts that penetration of used finance will reach 40% by 2023 – approximately a 10% increase on the current level of penetration. A key factor in this growth will be the increase in younger cars entering the market, driven by the typical three-year Personal Contract Purchase (PCP) renewal cycle. In January 2013 approximately 69,000 cars advertised on Auto Trader were aged between two and four years old. As of January 2018, that figure is closer to 93,000.

The younger the car the more expensive they’ll be, which is supported by data from the Auto Trader Retail Price Index. The average price of a used car in 2017 was £11,819, which on a like-for-like basis, was a 4% increase on 2016. Finance has the potential to make younger, more desirable used cars more affordable and accessible for a wider audience.

The Report highlights the appetite amongst consumers for finance. 52% of car buyers said that they already consider the cost of a car as a monthly price rather than the full retail price, which underpins just how fundamental finance has become in today’s car buying journey.

37% of car buyers claim to have bought on finance because it enabled them to spread out their payment monthly, 36% to get a better deal, and revealingly 36% because they couldn’t afford to purchase a car otherwise. Over a third of car buyers (37%) said that finance enabled them to buy a ‘better’ car, however, better is subjective. When asked what the term meant for them, their answers varied: ‘higher spec’, ‘bigger car’, ‘newer model’, ‘less mileage’, ‘more reliable’ and ‘premium looking’.

The research also highlighted that for many car buyers, finance is a confusing process, particularly amongst younger car buyers who are more likely to rely on finance to pay for their car. In fact, 1 in 4 (24%) 17 -34-year-olds buying on finance found it difficult to understand the options available to them, compared to just 8% of over 55s. And those yet to buy their car find it more difficult than those that have already gone through the process; 28% compared to 16%.

As Nathan explained, it’s here retailers have a huge opportunity: “There is massive potential for finance to grow the used car market in 2018; the conditions are right, and clearly there is significant appetite amongst today’s car buyers. However, making the financing of used cars more competitive, accessible and easier to understand for buyers will be a crucial step in taking advantage of this opportunity. In an industry where there is increasing competition and complexity, it is vital that retailers give themselves the very best chance of success; getting finance right will unquestionably be key to unlocking growth within a market that is three times the size of new car.

“Contrary to the negative commentary, the finance bubble is anything but set to burst. It’s going to grow, but only if the industry and the government allow it to do so.”

The Report revealed how finance has shaped buying behavior: those using finance typically pay 68% more than those buying their car outright (£17,087 vs. £10,142). However, the research revealed that it’s not encouraging irresponsible spending, with the clear majority (82%) of car buyers purchasing on finance claiming to keep within their set budget.

Whilst it’s clear finance plays a key role in today’s car buying process, the research raised questions to whether consumers fully understand its complexities. Less than a quarter (23%) of car buyers purchasing on finance consider APR as the most important element in influencing their decision, with over half (53%) conducting little or no research on rates. In terms of gender split, women (20%) are potentially less concerned than men (27%). This highlights that car buyers are far more likely to be influenced by the headline monthly rate cost itself rather than the APR.

To download the report, please visit:

About Auto Trader

Auto Trader Group plc is the UK and Ireland’s largest digital automotive marketplace. Auto Trader sits at the heart of the UK’s vehicle buying process and its primary activity is to help vehicle retailers compete effectively on the marketplace in order to sell more vehicles, faster. Auto Trader listed on the London Stock Exchange in March 2015 and is now a member of the FTSE 250 Index.

The marketplace brings together the largest and most engaged consumer audience. Auto Trader has over 88% prompted brand awareness and attracts an average of 55 million monthly cross platform visits a month, with circa 70% of visits coming through mobile devices.

The marketplace also has the largest pool of vehicle sellers (listing more than 470,000 cars each day). Over 80% of UK automotive retailers advertise on

For all media enquiries, please contact:

Andrew Nankervis – Senior PR Manager, Auto Trader


Ben darby – Senior PR Manager, Auto Trader


Auto Trader Group plc
Registered in England (Company number: 09439967)

Auto Trader Limited
Registered in England and Wales (Company number: 03909628)

Registered address:

1 Tony Wilson Place
M15 4FN
VAT number: GB 614 8918 20

Keep in touch

We use social media to speak to the UK’s largest car buying audience