Published: Feb 2024
Pages: 52
Format: PDF + conf. call

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UK Used Car Finance Market Insight 2024

This report focuses on the UK market for secured consumer finance for used cars.
– Secured loans are defined as those where the ownership of the vehicle rests with the lender during the life of the agreement.
– Although most finance is arranged for consumers buying cars, the report also includes cars purchased for business use, usually by small businesses.
The report describes trends in the used car finance market over the period from 2015 to 2023, with forecasts to 2028. It includes:
– Overall used car sales and finance penetration rates, split between franchised dealers, independent dealers and other channels.
– The split of the market between 26 finance companies, with a profile for each showing their share of outstanding loan finance.
– The role of brokers, including firms working with vehicle dealers and those dealing directly with consumes.
– Drivers of changes in the market, including FCA regulation, used car prices and availability, and the wider economy.


Objectives of the report

This report aims to get behind the publicly available high-level numbers on the number and value of car finance agreements to provide insight into the size and characteristics of the diverse range of lenders within the market.
Key questions it answers include:
– What are the different ways in which used car finance is offered in the UK?
– What are the main types of used vehicle finance products?
– Who are the main finance companies and what are their channels to market?
– Who owns the finance companies in this market?
– What is the role of brokers in the market?
– What alternatives are there to secured loans for used vehicles?
– How have changes to regulation impacted the market, and do these explain why some leading firms have left the market?
– Which types of firms are gaining market share?
– Will new entrants disrupt the market?


The used car finance market

Our definition of the used car finance market covers all secured car credit.
This security comes from the hirer or lender owning the vehicle during the period of the finance agreement. At the end of the agreement, the customer may either have the option to purchase the car or will automatically take ownership of it.
We exclude any loans that are not secured on the vehicle in this way, including hire contracts and unsecured personal loans. Although personal loans may sometimes be marketed as car loans, the lender has no control over how the advance is used.
The main forms of secured vehicle finance are hire purchase arrangements (HP), lease purchase (LP) and personal contract plans (PCP).
There has been a significant shift over the last ten years towards secured car finance from unsecured loans. Secured finance is provided for around 30% of dealer used car sales, a much lower penetration rate than for new cars.
Regulation of the sector has tightened considerably since the FCA took over consumer credit from the Office of Fair Trading in 2014, with a further key change to rules for broker commissions taking effect in January 2021.
In January 2024, the FCA said it would review historical motor finance commission arrangements and sales across several firms. Analysts estimated that lenders could face bills of up to £13 billion as a result, although in our view, the most likely outcome from the FCA’s 2024 review review is unlikely to be this large.
There are four channels by which secured finance may be arranged for vehicles. Dealer finance is the largest of these, with a small but growing role for ‘secondary’ brokers who sit between dealers and finance companies.
We set out the trend in book size for each major market player in the Company Profiles section.
Our analysis suggests that the largest firm in the market, Black Horse (part of Lloyds Bank), has a market share of around 26%, down from 41% in 2015.
The top three firms had a combined market share of 44% in 2022, down from 70% in 2015.


Key market insights

Total new lending in 2023 is estimated at £22.2 billion, up slightly on previous years, reflecting higher used car prices offsetting lower volumes than seen prior to the pandemic.
Some of the largest bank-owned lenders have left the market or limited lending in recent years, resulting in a shift towards smaller non-bank lenders, whose average rates tend to be higher.
Our analysis of lender size, based on the review of the financial accounts of the largest firms, breaks the market into low cost providers with APRs up to 10% in February 2024, medium cost (APRs 10% to 30% at February 2024) and high cost (APRs above 30% at February 2024).
Since 2019 the low price sector has lost volume whilst higher cost lenders have grown relatively quickly.



We expect the value of new used car secured finance to grow from £22.2 billion in 2013 to £30.7 billion by 2028, as finance penetration rates recover to pre-pandemic levels, and used car prices increase due to more expensive cars entering the market, including electric vehicles.
Our forecast assumes that any compensation arrangements required by the FCA following its review of use of discretionary commissions will be limited to a small minority of potential cases. A more severe intervention seems likely to result in much lower, or no, growth in the market.


Who is the report intended for?

CCar loan providers
Firms providing services to car loan lenders, including software providers
Car finance brokers
Owners and investors in the industry
Advisors including consulting firms, investment banks, lawyers and accountants
Industry regulators and policymakers


What are the sources and methodology?

This report is based on
– Extensive research into published industry sources.
– In-depth analysis of the macroeconomic environment and relevant market drivers.
– Financial analysis of the accounts and other financial information of car finance market participants.
– Interviews with industry experts and particiants.
Information from these sources has been synthesised and presented clearly and concisely with extensive use of charts and tables to illuminate points and support conclusions
Forecasts are based on our market model which incorporates the key levers which drive the market and makes explicit assumptions regarding each, supported by evidence.

About this report 2
What does the report contain? 2
What are the objectives of this report? 2
Who is it useful for? 2
What are the sources and methodology? 2
Summary 4
The used car finance market 4
Market size and growth 4
Outlook 4
About Apex Insight 5
Company background 5
Consulting services 5
Commercial / operational due diligence 5
Custom market analysis 5
Primary research 5
Growth strategy 5
Related research 5
Research subscriptions Error! Bookmark not defined.
Contents Error! Bookmark not defined.
List of charts and tables 11
Used car finance market 13
Definition of the market 13
Types of finance offered to purchase cars 13
Hire Purchase 13
Personal Contract Plan (PCP) 13
Lease 14
Alternative products 14
Non-POS car loan 14
Personal loan 14
Mortgage further advance 14
Credit Card 14
Types of customers 14
Market size and growth 16
UK car market 16
Dealer sales 18
Franchised dealers 18
Independent dealers 18
Other vehicle distributors 19
Motor finance penetration 19
Motor finance volumes 19
Non-prime lending 20
Market Drivers 22
Regulatory landscape 22
FCA authorisation 22
Regulatory requirements 22
Recent regulatory developments 22
UK Economic performance 24
Consumer borrowing 25
Ability to service borrowing 25
Wages 26
Source: Bank of England Financial Stability Report November 2017 26
Other market drivers 27
Competitive landscape 28
Overview 28
Success factors in dealer POS finance 28
Market size and share 30
Sub-Prime sector 30
Split by channel 31
Major lenders 32
Barclays Partner Finance 32
Description 32
Activities 32
Black Horse (Lloyds Banking Group) 33
Description 33
Activities 33
Close Brothers Motor Finance 34
Description 34
Activities 35
Recent developments 35
Hitachi Capital 35
Description 35
Activities 35
Recent developments 36
MotoNovo 36
Description 36
Activities 36
Recent developments 37
Santander UK plc 37
Description 37
Activities 37
Recent developments 38
Other lenders 39
1st Stop Car Finance 39
Description 39
Activities 39
Recent developments 39
Advantage Finance 40
Description 40
Activities 40
Recent developments 40
Alphera 41
Description 41
Activities 41
Billing Finance 41
Description 41
Activities 41
Recent developments 41
Blue Motor 42
Description 42
Activities 42
Recent developments 42
First Response 43
Description 43
Activities 43
Recent developments 43
JBR Capital 43
Description 43
Activities 43
Recent developments 43
Mallard Vehicle Finance 44
Description 44
Activities 44
Marsh 44
Description 44
Activities 44
Recent developments 44
Moneybarn 45
Description 45
Activities 45
Recent developments 45
Moneyway 45
Description 45
Activities 45
Recent developments 45
NIIB Group 46
Description 46
Activities 46
Recent developments 46
Oodle Financial Services 46
Description 46
Activities 46
Recent developments 46
Paragon 47
Description 47
Activities 47
Recent developments 47
Private & Commercial 47
Description 47
Activities 47
Recent developments 47
Raphaels Bank 48
Description 48
Activities 48
Recent developments 48
Startline 48
Description 48
Activities 48
Recent developments 48
The Car Finance Company 49
Description 49
Activities 49
Recent developments 49
Other funders 49
Admiral Loans 49
Car Finance Limited 49
Ratesetter 49
Car dealer finance brokers 50
Auto Union Finance 50
Creditas 50
DSG Financial Services 50
Eurodrive 50
Evolution Funding 50
Jigsaw Finance 50
Mann Island Finance 50
Motion Finance 50
Whichdeal Limited 50
Forecasts 51
Approach 51
Key driver forecasts 51
Economic growth 51
Interest rates 51
Amount of consumer debt 51
Unemployment and underemployment 52
Household disposable income and wages 53
Used car sales volume forecasts 54
New car sales volume 54
Used car sales volume 54
Our forecast scenario for used car sales volumes 54
Motor finance penetration 55
Regulatory impacts 55
Other drivers of finance penetration 56
Our forecast scenario for used car finance penetration levels 56
Forecast used car finance values 57
Appendix: abbreviations 58

List of charts and tables

Market participants 4
Used vehicle new secured finance agreement volumes (Thousands): Actual and forecasts 4
Car parc (millions) 16
Car sales – volume (millions) 16
Average period between car sales / years 17
Dealer car sales – volume (millions) 18
Consumer vehicle finance penetration level – transactions financed as % of total 19
Total advances – volume / ‘000 20
Total new consumer POS advances – value / £bn 21
Key FCA regulatory requirements for car dealers 22
UK real GDP / % annual changes 24
UK outstanding unsecured consumer credit / £bn 25
Historical number of unemployed and underemployed / m 25
UK median earnings (current prices) and real household disposable income annual growth rates / % annual change 26
UK household debt to income ratio 26
Market participants 28
Breakdown of annual new lending 30
Volume and value of used cars finance in 2017 (millions and £ billions) 31
Clydesdale Financial Services Ltd. used vehicle secured finance net investment - £m 32
Lloyds Banking Group UK used vehicle secured finance net investment - £m 33
Close Brothers used vehicle finance net investment - £m 34
Hitachi Capital used vehicle net investment £m 35
MotoNovo UK used vehicle net investment £m 36
Santander Consumer Finance UK used vehicle net investment £m 37
1st Stop Car Finance Limited Financials 39
Advantage Finance Limited Summary Financials 40
Billing Finance Limited Financials 41
Blue Auto Holdings Limited Financials 42
First Response Finance Limited Summary Financials 43
JBR Capital Limited Financial Summary 43
Mallard Leasing Ltd. Summary financials 44
Marsh Finance Ltd. Summary Financials 44
Moneybarn No. 1 Ltd. Summary Financials 45
Moneyway (Secure Trust Bank) Summary Financials 45
Oodle Financial Services Limited Summary Financials 46
Paragon Banking Group PLC Summary financials 47
PCF Bank Ltd. consumer finance division summary Financials 47
Startline Auto Receivables Ltd. and Startline Motor Finance Summary Financials 48
The Car Finance Company (2007) Limited Summary Financials 49
UK real GDP / annual changes 51
UK historical & forecast unsecured household debt / £bn 52
Unemployment and underemployment / m 52
Number of people in employment / m 53
UK median earnings (current prices) and real household disposable income annual growth rates / % annual change 53
Historical and forecast car sales – volume / £m 54
Historical and forecast used vehicle finance - volume ‘000 56
Historical and forecast used vehicle finance - £ billion 57

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