IF new car sales are a barometer of economic health, the UK recovery would seem to be motoring along nicely.
New car registrations recently rose for a 30th consecutive month, according to the Society of Motor Manufacturers and Traders (SMMT), as the volume of cars sold in the UK finally begins to catch up on pre-recession levels.
That momentum is expected to have continued with the launch of the 64 plate last month, while market confidence is also highlighted by a recent survey on buying intentions.
Sainsbury's Bank found more than a fifth (23%) of UK adults expected to buy a new car by March next year, having reported a similar figure six months ago. Some 13% said they intended to buy a new car, with 11% looking for something second-hand.
So what is giving UK drivers the confidence to upgrade their wheels, and what is the most cost-effective way for them to do so?
Brian Gilda, chairman of Ford dealer Peoples Motor Group, said it is "the best possible time" for the average consumer to buy a car, citing historically low interest rates, flexible finance options and vehicle quality among the "solid" factors driving the market.
He said: "Nobody builds a bad car anymore, therefore the key at the moment … is the access offer.
"The public are being convinced of the product. They are then looking for the best access offer, whatever it is. It could be £119 down and £119 a month, it could be a PCP [personal contract purchase] or whatever.
"That is what is grabbing their attention and they are in a lucky position. And it will stay that way for a while - it is a buyer's market."
PCPs, which operate in a similar way to mobile-phone contracts, have boosted the public's appetite for buying new cars, according to the SMMT.
Such deals typically allow the consumer to buy a car outright or upgrade to a new model after a fixed monthly payment plan comes to a close, often after a two-year period.
A spokesman for the SMMT said: "Essentially, how that differs from what was going on pre-recession was that there is less risk involved.
"Previously, [the finance] was sometimes secured against assets other than your car - your mortgage for example - so if you couldn't make payments you might have lost your house. But now they are secured just against your car."
The extent to which drivers are using finance deals to buy cars was underlined by the Finance & Leasing Association (FLA), the trade body for the motor finance and other sectors.
Paul Harrison, head of motor finance at the FLA, said the percentage of private new car sales financed by its member is now around 75%.
He said: "People are choosing to make these purchased on credit because there are some very competitive deals to be had, and innovation in the range of products on offer means customers can shop around for the one which suits them best."
The survey by Sainsbury's Bank found 40% of those planning a car purchase will choose a loan or other finance to cover at least part of the cost.
More than one-fifth (21%) said they would consider an unsecured loan, 18% said they would contemplate a higher purchase agreement, and 20% said they would opt for a PCP.
Meanwhile, a study by motoring group AA found nearly one-third (30%) will opt for finance such as a personal loan, with another 30% expecting to dig into savings to fund the purchase.
Mark Higgins, director of AA Financial Services, advised consumers to compare finance deals with personal loans before taking the plunge.
He said: "Shopping around could get you a good interest rate for a personal loan."
That advice was echoed by Gilda at Peoples Motor Group, who noted that consumers now have the extra assurance brought by the Treating Customers Fairly regime.
Part of that is a responsibility for dealers to check whether a consumer can afford the repayment plan.
Gilda said: "Any dealer in any segment of the market has to bring that to the forefront of his mind when a consumer is purchasing a vehicle, so the days where those huge interest rates applied are not gone forever, but almost gone.
"It's moved almost 180 degrees, where the responsibility is with us to treat customers fairly. And, quite rightly, we should be in a position to do that."
Gilda said that running costs form a "dominant part" of drivers' decision-making when it comes to buying a car, alongside depreciation.
"That's why PCP plans work, because there is a determination that at the end of two years the car is worth X," he said. "The second part … is how green the vehicle is. But if it's a very green car and is going to cost you £2000 more, or a £100 a month more, the green maybe gets a bit more subordinated."
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