Paying up front for a new vehicle has continued to slow down as an increasing number of consumers demand increased flexibility, according to research from Close Brothers Motor Finance.
The Britain Under the Bonnet report from Close Brothers found that just under half (49%) of car buyers intend on paying upfront for their next vehicle, down from 57% on the year before.
Close Brothers said the shift to subscription models is trickling down to the motor industry, as two-in-five (40%), opt for car finance.
The trend was most prominent among younger drivers aged between 17 and 24.
Sean Kemple, managing director at Close Brothers Motor Finance, said: “This shift to finance is so core that for the first time in our research, the number of people who want to pay for their car upfront has fallen below 50%. And this could be far higher as we approached 2021.
“For young people especially, this prompted a shift away from ownership and towards subscription models, or at least models with regular cost instalments rather than single payments.”
Of those who intend on using finance towards their next vehicle, 13% said they prefer the method as it allows them to spread the cost, for 10% it allows them to afford the model they want to buy, and 9% said it means they can purchase a relatively new vehicle model. 8% would prefer to lease their next car.
But according to the research, the trend switches direction as people get older – 18% of those aged 55 and over would use finance to buy their next car, with 60% keen to pay upfront – down from 64% last year.
Kemple said: “We’re now living in a world of monthly subscriptions for almost everything, from mobile phones to make up to food, meaning we can chop and change at the drop of a hat and only pay for what we use.
“This is now the norm for a whole generation coming through the market who are used to being able to upgrade and adapt to suit their needs, and the motor industry is by no means exempt.
“As we adapt to a changing world, dealers need to keep a close eye on the latest developments in this field, as customers will rely on them as a source of knowledge.”
Earlier this month new web-based car subscription service Mycardirect launched in the UK, offering all-inclusive packages ranging from one-to-24 months, providing maintenance, VED, tyres via one monthly payment.
That came a months after Volvo’s Care By Volvo service began to offer the Swedish brand’s full range of vehicles – complete with insurance road tax and maintanence – for a subscription payment £559-a-month (based on a Volvo XC40 T3 Momentum).
Close Brothers research also found that car dealers believe that the appetite for finance will be far higher in 2021, with 71% believing consumers will opt for this versus paying upfront (27%).
The findings come as latest figures show the new car market accelerated 19% by value and 9% by volume, while the used car market grew 18% by value and 9% by volume in July 2020 compared with the same month last year.
In 2019, the new car market was worth more than £19.6bn, with finance accounting for almost 92% of private new car purchases.
Similarly, in the used market, the value of finance advances rose by 4%, topping £18.37 million during 2019.
You can read the Britain Under the Bonnet report here.