Resurgent confidence as car buyers opt for flexible car buying plans
One in three people are looking to change their car in the year ahead (32%) – but 2022 may also be the year when there are seismic changes in the way people choose to pay for their car – according to new research from AA Financial Services.
Car demand for the year ahead is being driven by younger people aged under 35 (43% wishing to change car in 2022, compared to 23% of over 55s). These are also the people shunning notions of outright car ownership, moving instead to more flexible, short-term approaches to car finance, such as car leasing and Personal Contract Purchase (PCP).
The AA poll of 2,037 drivers revealed less than half (41%) entertained the traditional idea of buying a car by paying full asking price – a notion that held least appeal with the under 35s (31% compared to 51% of over 55s). Instead, a growing number of people are looking for shorter-term finance solution that offer greater simplicity, convenience and flexibility. The UK’s transition to electric cars is also an influencing factor, with around one in five people (19%) wanting short-term solutions on car finance, opting for a petrol or diesel car now, before deciding when would be the right time to make the big switch to an electric car.
For those not interested in buying their next car outright:
- More than a third of people (36%) like the idea of having all their car servicing and maintenance costs included within a simple, single monthly payment. In the age of iPhones and streaming services, culturally more people are thinking about what they can afford a month to get access to the things they want.
- Overall, 27% want to have the freedom to regularly change their car every few years when they get bored of it or fancy something else.
- A further 22% only expect to pay monthly for the period that they choose to keep it, effectively covering its deprecation, rather than paying up front for total value of the car itself.
All these factors were most popular among under 35s and, across the UK, the prospect of having servicing and maintenance costs included within a single monthly payment for a car was universally popular across all regions.
James Fairclough, CEO AA Financial Services, commented “The promise of fresh car demand in 2022 is welcome news, following a challenging year for the car industry.
“The impact of Covid and the global shortage of semi-conductors has seriously impacted new car registrations this year, pushing up demand for used cars – with previous AA research suggesting that values of some used cars has risen by up to 57%.
“What we expect to see in 2022 is the second-hand market benefitting from resurgent car demand. We also believe the way people pay for their cars will change and diversify. As people think more about convenience and short-term flexibility, propositions such as PCP and leasing will become more popular. The economic uncertainty of Covid and the transition to electric cars will continue to influence drivers until the traditional notion of paying full-price for a car and keeping it for as long as possible is something for the history books.”
The allure of flexible shorter-term financial solutions for cars is also influenced by the frustrations people feel over traditional approaches to car buying, with 94% of respondents identifying their top five car buying headaches as:
- Buying a second-hand car that turns out to have something wrong with it (33%).
- Rising maintenance and service charges that prove to be expensive as the car gets older (32%).
- Heavy depreciation, finding out the car isn’t worth much by the time I’ve finished paying off a tradition personal loan (25%).
- The hassle of raising the money to buy outright a new or nearly new car (24%).
- Knowing when it will be the right time to switch to an electric car and, until then, being nervous about making a new long-term finance commitment (19%).
The headaches associated with traditional approaches to car buying were most strongly felt by female drivers, which partly explains why women were more drawn to the idea of more flexible solutions – such as having all servicing and maintenance costs included within the single monthly payment (34%).
James Fairclough, CEO AA Financial Services, continued: “For many people, the frustrations with traditional car buying, together with their desire for simpler and flexible alternatives, points towards re-evaluating the relative merits of PCP as a timely and relevant product.
“Traditionally, the preserve of the new car market, we plan to open up the second-hand car market more broadly to the benefits of PCP in 2022. This will increase our customer’s ability to choose a car finance option that is best-suited to their circumstances and lifestyle.”