COVID-19 has created unprecedented circumstances in almost every industry and economy in the world, affecting businesses and consumers alike. Measurements and restrictions have been put in place by the government to contain and curtail the spread of the virus, safeguard businesses, and protect the NHS.
What is the impact on the car finance sector?
The car finance industry has been hit as hard as any, as new car production halted across Europe back in March 2020. The purchase of new or used cars came to a standstill last year. As dealers were required to close their showrooms and postpone car deliveries.
In this blog, we will discuss in more detail. How COVID-19 impact on the car finance sector was effected globally since the beginning of last year?
Falls in Sales During First Lockdown
According to the European Automobile Manufacturers Association, between January and October 2020 new-car registrations dropped by 26.8% in the European Union. Eight million cars were first registered during this time, a drop of 2.9 million from the same period in 2019. Spain, Italy, and France were the worst hit – with 37%, 31%, and 27% reductions, respectively.
A Change in the Dealership Model
National lockdowns have driven significant change in the way customers search for and find car finance. The relationship between online and showroom motor retailer sales has changed with it. Being forced to work from and stay at home means more of us are shopping online. And also relying on the internet to obtain goods and services. This means an increasing number of car dealers and car finance companies are having to embrace digital infrastructure. Which reveals how much COVID-19 impact on the car finance sector was effected.
By now, dealers should be able to switch between the two, as lockdown restrictions continue to fluctuate. Nevertheless, there are rumours that this current lockdown may last until March, meaning digital click-and-collect may be the only option for the first quarter of the year.
Boost in Electric Vehicle Sales
One positive piece of news for the motoring world during lockdown – the electric car market is booming! At the end of September 2020. There were over 164,100 pure-electric cars and over 373,600 plug-in models driving on UK roads.
In fact, according to the Society of Motor Manufacturers and Traders (SMMT), pure-electric cars accounted for 6.7% of new car registrations last year, making it an extremely positive 2020 for the electric car market.
Consumer Credit and Ability to Finance
COVID-19 has had a major effect on consumer credit and the ability for people to obtain finance. People are low on work, furloughed or even worse completely out of employment. The collective ability to acquire COVID-19 impact on car finance sector or keep up with existing finance payments is becoming less and less. Missed or late payments as a result of this can seriously impact peoples’ credit ratings. It means they may struggle to obtain finance elsewhere in the future.
Getting a Car Finance Deal with Poor Credit
If you have poor credit, as an indirect result of COVID-19 or not, but still want to look into finding a car on finance, you should look at bad credit car finance. This is a deal that a lender agrees to offer someone with a poor credit history. No deposit is required, so you only have to cover your monthly payments that will be spread across 2-4 years.
To assess whether this is suitable for you, a ‘soft’ credit check will be made first to see if the lender can find a finance deal and to check which types are available to you. This will not impact your credit rating. If you are happy with what they offer, an actual ‘hard’ credit check will be made, which will impact your credit rating.
The point of this is to take the risk of negatively impacting your credit score with a ‘hard’ credit check at first. If credit is not available to you and you fail a credit check, this will affect your credit score. With a ‘soft’ check, a lender can assess your options without putting a blip on your credit report.