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2017 vehicle finance outlook

According to Ladbrokes, a £1 accumulator bet placed at the beginning of 2016 for a Leicester City Premier League win, followed by a Brexit vote and a Trump presidency would have returned a staggering £4.5 million. Whilst it’s impossible to say whether 2017 will hold quite the same level of excitement on the national and international stage, it’s interesting to speculate what the next twelve months might have in store for the UK’s car finance market.

Where next for new car registrations?

New car registrations have powered ahead since 2009, enjoying record growth. Driven forward by innovative design, manufacturer incentives and the popularity of PCP finance, new car sales have never been stronger. However, whilst fleet registrations have continued to grow by over 5% during 2016, there has been a discernible levelling off in consumer sales and it looks likely that 2017 could be the year when dealers really start to feel the impact of softening demand.

Will used car sales pick up the slack?

A rebalancing towards used cars sales certainly seems to be on the cards and many finance brokers are already gearing up for change. For example, our own research shows that the UK’s largest brokers are expecting much faster growth in used car finance than new over the next five years, with four out of ten (38%) anticipating that used car finance will set the pace compared to only one in ten (10%) expecting new car finance to spearhead growth.

What happens if the economy slows?

A rebalancing would be one thing, but forward looking dealers may also want to start making contingency plans in case of a more general slowdown. So far, the UK economy has held up pretty well following the EU referendum but there is no doubt that we are entering uncharted territory. If lower demand puts pressure on vehicles prices, consumers could find that the value of their vehicle falls, leaving them with little room for manoeuvre when they come to choose a new model. In turn, lenders are likely to shift priorities when structuring new deals, opting to collect a higher proportion of the price through the monthly payments and reducing the size of the final balloon. Clear and consistent communication with customers will be key.

How will online finance shape the market?

A final area for dealer attention during 2017 will be online finance. A growing number of car buyers are now arranging their finance online, entering the showroom with a decision-in-principle up to a pre-agreed maximum from one of a growing number of online finance brokers. In 2017, dealers may want to consider whether they replicate this type of facility or re-invigorate their own sales process to accommodate the change.


Paragon Bank PLC is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority. Registered in England number 05390593. Registered office 51 Homer Road, Solihull, West Midlands B91 3QJ. Paragon Bank PLC is registered on the Financial Services Register under the firm reference number 604551