Consumers manage rising used car prices by paying higher deposits
Our latest data shows that car buyers are primarily managing rapidly rising used car prices by paying higher deposits on their motor finance deals.
The average deposit processed through the iVendi platform has increased by 58% since January 2020 but the average loan amount paid out over the same time period has only risen by 14%, while the average length of repayment period remains unchanged.
James Tew, CEO, said: “iVendi processes hundreds of thousands of finance applications every year made both online and in the showroom, and so we are in a very good position to provide an overall analysis of what is happening to motor finance.
“We are living through a time when, because of falling stock supply and consistently high demand, used car prices are rising every month by amounts that are probably unparalleled in living memory. It is a very unusual market.
“This raises important questions about how customers are coping with these price increases from a motor finance point of view and our analysis provides some answers at a fundamental level.
“There has been a possibility that car buyers have been stretching themselves to make purchases and affordability may be becoming an issue but our figures suggest that is probably not the case. The amount they are borrowing, while higher, is only up 14%.
“Instead, the real shift is in the deposit where customers are finding, perhaps from money saved up during the pandemic, 58% more on average to fund the vehicle that they want. The financial emphasis of higher prices is being frontloaded.”
James added that interestingly, there were signs that motor finance companies were also approving an increasing proportion of online applications. The number of applications submitted online had risen by 18.6% since January 2020 but the percentage of those approved and paid out had increased by 55.5%.
“There is probably more than one factor in effect here. There are some anecdotal indications that applicants entering the market now may be of a higher quality than previously, largely people who were waiting until showrooms reopened in April. Plus, in addition, there is a long-term trend of improving quality of online applications.”
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