More finance deals since VAT hike

  • Dealer finance agreements becoming more popular
  • Low interest rates attract customers since VAT hike
  • Flexible PCPs account for 60% of deals signed in 2010

Car buyers are increasingly using dealer finance agreements to buy new and used cars.

According to new statistics from the Finance and Leasing Association (FLA), 6% more new cars and 20% more used cars were bought in January 2011 compared to the same month last year.

Thanks to low interest rates, many customers have begun looking at finance deals as a way to re-coup some of the cash lost since the rise in VAT on January 1.

Dealer finance is still the most popular way to buy a new car. 53% of buyers went for this option over the past year - the highest rate since 2009.

Personal contract plans, or PCPs, are rapidly becoming the most popular method of financing your purchase.

Paul Harrison, Head of Motor Finance at FLA, explains: "More and more customers are turning to personal contract purchase agreements because of the flexibility this provides. Customers do not have to commit to buying the vehicle outright if they do not want to, and can hand the keys back and walk away once all payments have been made. PCP deals accounted for 60% of the credit advanced for new cars in 2010."