More than half of motorists change car before finance is paid

A massive 54 per cent of all new and used cars bought in the UK using motor finance last year (2012), changed their car before the term was due to end.

The analysis from global information services company Experian, also revealed an interesting comparison between 2012 and three years earlier. In 2009, only 35 per cent of motorists changed their cars before their finance agreement were due to end. And going further back, the figure was lower still in 2007 at only 28 per cent.

What does this tell us? Well, the summary figures clearly show that growing numbers of motorists are changing their vehicles earlier. This could mean that they are rearranging their finances. It could also mean that well organised dealerships are tempting them with car exchange offers before their current vehicle finance agreement comes to an end. And in a market that has ever more discerning car buyers, there may by a hundred reasons why they decided to buy a different vehicle before their finance on their existing one had been fully repaid. Their circumstance may have changed from a single person to a married person with a baby or they may have gotten a promotion and decided to treat themselves to a better new car.

Experian’s analysis of over 87,000 hire purchase (HP) and personal contract plan (PCP) motor finance agreements across the UK revealed that during 2012, a keeper change occurred on average nearly 13 months before the original finance term was due to end.

The analysis also revealed that motorists buying used cars were likely to change much sooner – on average 18 months before the finance agreement was due to end, compared to new car owners who changed vehicles seven months before the end of the finance agreement.

In comparison during 2009, a keeper change on a new vehicle occurred on average five months after the end of the agreement and only one month before the agreement was due to end on used cars. During 2007, motorists were even more likely to hold onto their cars for longer with new car owners changing 13 months after the end of the finance agreement and used car owners changing after seven months.

The vehicle types that were more likely to be changed before the end of the car loan in 2012 were luxury vehicles such as the Mercedes S Class.  This was followed by upper medium cars (such as the Ford Focus) and MPVs (such as Vauxhall Zafira).  The vehicles types that consumers were most likely to hold onto were basic models and executive models (such as the Mercedes C Class).

The analysis also found that despite the fact that consumers were opting to change their vehicles sooner, longer agreement terms were still the most popular, with over 80 per cent of motorists opting for average car loan terms of 26 months or more.

In addition, although hire purchase remains by far the most popular option, comprising of 86 per cent of agreements in 2012, there has been a slight shift towards personal contract plans which are up from 6.12 per cent in 2007 to 13.69 per cent in 2012.

Andrew Ballard, Principle Consultant at Experian’s automotive business said: “This analysis shows a significant shift in the way people are choosing to manage their finance agreements.  The preference towards longer terms and the increase in PCP agreements suggests consumers have a need to keep initial outlay and regular motoring costs low.

“However, shorter length of ownership suggests that they are either considering their own finances and ability to keep paying or are swayed by the wealth of subsidised finance deals and incentives available to upgrade or change to something new.  Either way, regular customer contact will enable dealers to better understand customer’s needs and changing circumstances, allowing the right deals to be offered to the right customers at the right time.”