A long-term plan for the motor industry combined with more financial stimulus is needed if finance houses are to meet increased demand for new cars when the economy recovers, a trade organisation has said.
Latest figures released by the Finance & Leasing Association (FLA) show the smallest drop in private new and used cars bought with dealer finance since September 2008.
The cars bought by consumers using finance obtained through dealerships in June fell by six per cent compared with the same month a year earlier. But the FLA says more financial stimulus and a long-term plan from Government are needed for lenders to meet demand when the economy recovers.
New motor finance business was down significantly in the first half of 2009 compared with 2008. The number of private new and used cars purchased using dealer finance fell by 23 per cent and ten per cent respectively.
The business car finance market also struggled. Finance provided to businesses for new cars fell in the six months to June by more than a third compared with the same period in 2008.
The FLA said business confidence remained low with companies delaying investment not least because of the availability and cost of credit.
Geraldine Kilkelly, head of research and chief economist at the FLA, said: “We have seen the smallest drop in motor finance since September 2008 but motor finance providers are still very concerned about the lack of well-priced funding on the wholesale markets. While most lenders are able to meet demand at the current reduced levels, if demand increases in the second half of the year the availability of credit for car buyers may become an issue. The Government needs to prepare for a sustainable recovery by ensuring that the car finance industry has the capacity to meet future demand.”