The landscape of the used car finance market is poised for a significant transformation in 2024. A confluence of factors is set to propel the industry into an era of heightened competition, and industry experts at iVendi are predicting a dynamic shift in the way financial services are provided to buyers of pre-owned vehicles.
Factors Driving the Transformation
Darren Sinclair, Chief Commercial Officer at iVendi, a leading motor retail technology specialist, has identified several key factors that are expected to shape the landscape of the used car finance market in 2024.
- Increased Volume of Used Car Sales: One of the primary drivers of change is the surge in the volume of used car sales. As more vehicles enter the second-hand market, there will be a growing demand for financing options. This increase in demand is likely to spur competition among motor finance providers.
- Ongoing Readjustment of Vehicle Values: The value of used cars is continually adjusting as the market adapts to changing supply and demand dynamics. These readjustments will have a direct impact on the amount of motor finance being borrowed, potentially leading to more competitive financing terms.
- Lenders Exploring New Sectors: Traditional lenders are seeking opportunities in new sectors of the market. This expansion beyond their usual boundaries is likely to further intensify competition.
The Impact of 'Normalisation'
One of the most significant factors contributing to the evolving landscape of the used car finance market is the ongoing 'normalisation' of the sector. As the market matures and readjusts, several outcomes are anticipated:
- Increased Competition: With a higher quantity of lower-value financing deals in the market, competition among motor finance providers is expected to escalate. Borrowers are likely to benefit from a wider range of financing options and potentially more attractive terms.
- Reduced APRs and Incentives: To stay competitive, lenders may respond by reducing Annual Percentage Rates (APRs) or introducing other incentives to attract business. This could make financing a used car even more appealing to consumers.
- Long-Term Trend: The increased competition is not viewed as a short-term phenomenon. Instead, it's expected to evolve into a long-term trend as the supply of used cars gradually improves.
The Changing Shape of the Market
Another intriguing aspect of the evolving used car finance market is the potential for change brought about by unexpected sources. These include factors like electrification and the emergence of major Chinese car manufacturers. While their impact on used car sales is currently limited, it's expected to grow over time, influencing motor finance.
Surprisingly, captive lenders, traditionally tied to specific automakers, may venture into non-captive lending. This move could be driven by the changing dynamics of the used car market, including the growth of electrified vehicles and the entry of new players. Such expansions are likely to introduce further competition into the market.
In 2024, the used car finance market is poised for a period of transformation and intense competition. Increased used car sales, ongoing adjustments in vehicle values, and lenders exploring new sectors are all set to shape the industry. As the market normalises and adapts to changing conditions, borrowers can expect a wider array of financing options, potentially more attractive terms, and an overall more competitive landscape.
The used car finance sector is on the move, and it's clear that innovation and adaptation will be key to success in this ever-evolving market. Buyers and financial institutions alike should prepare for an exciting journey down the road of change in the years ahead.