Car Dealer News - In its latest Monthly Market Intelligence report, Auto Trader has revealed that despite a rise in car finance interest rates, people are still keen on taking out loans to buy their next vehicles. The average APR for new cars has increased by 4.5 percentage points in the last two years, reaching 8.4 per cent. However, the report indicates that there has been a slight softening in the volume of cars purchased on finance, attributed to individuals having higher equity and more cash due to the Covid pandemic, leading them to put down larger deposits and supplement with personal loans. Nonetheless, consumer engagement with finance calculators on Auto Trader's platform has reached record levels.

The rising interest rates have not deterred consumers from seeking car finance, as the actual impact on monthly payments is relatively minor – around £8 more per month for a used car compared to last year. Auto Trader points out that average used car prices have significantly increased over the past few years, prompting more individuals to turn to financing options for their next purchase.

Rachael Jones, Auto Trader's director of automotive finance, stated that while rising interest rates are a concern amid the growing squeeze on household finances, the fixed monthly cost of car finance prevents any direct impact on monthly outgoings for those under contract. Moreover, the recent rise in interest is far less significant when compared to the substantial increases in monthly mortgage bills. Despite the increase in interest rates, consumer demand for finance on Auto Trader's marketplace remains strong, with a 15 per cent increase in the number of people using their finance calculators compared to the previous year.

The report for June 2023 also revealed several noteworthy trends in the automotive market. The first half of the year saw a significant surge in site visits, up by 61 million compared to the previous year, reaching a total of 466 million visits. June alone witnessed an 11 per cent increase in site visits compared to the previous year. Used car demand outpaced the previous year by two per cent, but supply remained constrained, resulting in a four per cent decline in June. Despite supply challenges, used car sales increased by three per cent year on year. Retail prices for used cars rose by 3.2 per cent in June, marking the 39th consecutive month of growth.

Auto Trader also noted that used electric vehicle (EV) prices stayed 19 per cent below last year's levels, indicating potential opportunities for consumers interested in eco-friendly vehicles at relatively lower costs.

Additionally, Rachael Jones discussed the upcoming Consumer Duty introduced by the Financial Conduct Authority, set to come into force on July 31, and its potential impact on car dealers. She emphasized the importance of dealers being prepared for the new regulations, but also reassured that assistance is available for those who need to adapt to the changes.

In conclusion, despite the rise in car finance interest rates, consumers continue to show strong interest in financing their vehicle purchases. Auto Trader's Monthly Market Intelligence report for June also highlighted positive trends in the automotive market, including increased site visits and used car sales, along with a consistent growth in used car retail prices. As the market evolves, dealers should also be mindful of upcoming regulatory changes and seek guidance to ensure compliance with the Financial Conduct Authority's Consumer Duty.

You can read the original article here.