Drivers all over the UK are downsizing to cheaper, less prestigious and more fuel-efficient vehicles and banking the cash difference as the cost of living crisis continues.
BMWs and Audis are out – instead, dealerships report an increase in demand for used cars, particularly mid-range models such as Vauxhall Corsa, Volkswagen Golf and Ford Focus in the past two months. There has also been a drop in the number of people seeking to lease vehicles, with those who do so wanting cheaper deals.
The shift in driver behaviour is expected to continue as the reality of the current crisis deepens, says Lisa Watson of Close Brothers Motor Finance, which provides financing for vehicles. “We’re getting people coming from more expensive vehicles switching into more fuel-efficient ones … because clearly consumers are feeling the pinch,” she said.
“We have started seeing these changes over the last two to three months, and they are now becoming more apparent.”
She said that people were clearly growing increasingly nervous about the rising cost of energy. However, she expected that buyers would continue to fund their cars through finance deals such as hire purchase rather than shelling out large sums to buy a vehicle outright.
Vehicle leasing comparison sites have reported a fall in the number of inquiries for vehicles. Auto Lease Compare said the number of enquiries was down 17% on September last year. And LeaseLoco reported that 1,500 vehicles were sold through the platform in January but there had been a slowdown since consumer confidence dropped.
With disposable income now severely squeezed, motorists are looking to reduce their monthly car payments through cheaper lease deals, said LeaseLoco chief executive John Wilmot.
“There is a significant trend towards people looking for cheaper alternatives as they are concerned about their outgoings.
“People are concerned over paying their energy bills and the last thing they want to do is overcommit themselves on a car payment. So it’s only natural that they will try to reduce that expenditure.
“There’s a pretty big cohort of people that go ‘I want or need a new car for that reliability aspect but I can’t have the premium marque that I once had, so I’m going to downgrade’.”
Trends in car finance were changing, said Watson. She has seen instances where people who in the past were buying cars such as BMWs and Audis are now switching to cheaper and more efficient vehicles.
“We’ve just seen this trend in the past two months,” she said. “There’s a lot of nervousness about what’s going to happen. And every time you turn on the news, it’s all about fuel prices and how much it’s going to cost.
“I think people are having to look at their expenses quite closely and see where they can still have the luxury of a car… but an affordable luxury.”