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Diesel concerns overtake Brexit for car buyers say motor finance brokers

Diesel overtakes Brexit in car buyer concerns

  • 100% of brokers blame weak car buyer confidence on uncertainty over what fuel type to buy
  • Slowdown in new car market boosting used car market sales
  • Only 24% of brokers think the FCA motor finance update will have a positive effect on their business.

Concern over diesel vehicles has now overtaken Brexit in terms of why car buyer confidence continues to fall, Paragon Motor Finance’s most recent survey of leading UK brokers reveals.

The Government’s push to eradicate diesel cars by 2040 and similar plans for hybrid vehicles has had serious ramifications on consumer confidence with every broker Paragon surveyed (100%) blaming uncertainty over what fuel type to buy as the reason for car buyers sitting on the sidelines. This compared to 64% of brokers blaming concerns over Brexit.

Responses in the latest Headlight report come as latest SMMT figures for May 2018 showed diesel registrations for new cars were significantly down - by 23.6% - compared to May 2017 as consumers and fleets are in somewhat of a dilemma over which fuel choice to buy. Julian Rance, Director of Motor Finance at Paragon, said:

What we need as an industry is clarity. Diesel cars have been demonised but the infrastructure currently doesn’t support alternative fuel vehicles (AFVs).
The diesel used car market is still strong and that says that consumers still want to buy them, possibly because there is not a viable alternative.
We are looking at four or five car changes before we get to 2040, but there needs to be proper guidance from the Government on how it will work, what AFV rates will be going forward and a timetable of events because the uncertainty is causing confusion and negative demand.

Responses also showed that consumer confidence had plateaued over the past 16 months. The last time confidence was reported to be this low by motor finance brokers in Paragon’s survey was back in July 2016 - the month straight after the Brexit vote.

With the final report from the Financial Conduct Authority (FCA) into the motor finance market due in September, brokers surveyed said they were most interested in reading about commission arrangements (59%), affordability criteria (54%), transparency of information (49%) and asset valuation pricing risk (33%).

While only 24% felt that the recent FCA motor finance update would have a positive impact on their business over the next six months, the majority (62%) were expecting it to have no impact.

A cooling in the new car market looks likely to continue for the remainder of 2018, according to feedback from brokers. Expectations in the new car market for the next six months saw 34% of brokers expecting growth but 29% expecting applications to fall.

In a sharp comparison, 46% of brokers expected more applications for used car finance in the coming six months and a further 41% expected similar figures to the same period last year.

Other findings in the latest Headlight report reveal uncertainty over the impact of open banking on the motor industry, average deposits driven up for new cars to 13.5% compared to 8.4% a year ago, a slowdown in the new car market boosting used car sales and how the motor industry was in the driving seat for the GDPR changes in May.

The full Headlight Spring/Summer 2018 report can be found here.

19 June 2018

Paragon Banking Group PLC.  Registered in England number 2336032.  Registered office 51 Homer Road, Solihull, West Midlands  B91 3QJ.


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