Fernando de Querol Cumbrera
Research expert covering construction, loans, leasing, savings, and debt
Car financing and leasing in the United Kingdom - statistics and facts
Car loans, personal contract purchase (PCP) agreements, leasing, renting, and even car sharing are the main options available for drivers to get their hands on a vehicle in the United Kingdom. Each of those alternatives has different benefits and drawbacks. Generally, car loans and PCPs are the most popular choices. But with the price of buying a new car in the UK increasing at a fast pace in the past few years, some people are getting interested in leasing, either as a way to avoid down payments or because, on some occasions, the monthly payments are lower. Meanwhile, the number of car-sharing users in the UK reached two million in 2022, as it is a fitting solution for drivers that only need to use a car occasionally.
Price is one of the main reasons that people consider when evaluating which financing options they prefer. But ultimately, some drivers may just prefer to get a loan because they want to own the car they drive, while others may just like leasing or PCP options because of the flexibility that they provide.
What goes into the cost of buying a car with a loan?
Beyond the rising price of motor vehicles, the high interest rates of consumer credit in the UK, which in June 2024 amounted to 7.48 percent with a floating rate, have been another concern whenever purchasing a car with a loan. Beyond the economic situation, there are several factors that may increase the cost of borrowing for an individual. Banks and borrowers usually charge higher interest rates to people with a higher credit risk. Additionally, as shown here by the representative APR of car loans by Barclays, interest rates also vary depending on the size of the loan.The leasing sector electrifies
The market share of electric vehicles has been rapidly increasing in the past years. That has been particularly the case in the leasing sector, with the share of new cars added to UK rental and leasing fleets having increased rapidly during the past years. In the second quarter of 2021, 18 percent of those additions were battery electric vehicles (BEVs), while they made up 37 percent of all additions in early 2024. The presence of hybrid cars in those fleets has also been increasing significantly during that period. In contrast, the adoption rate of electric vehicles in the automotive market at large has been slower. Although 16.6 percent of new passenger cars registered in the UK in 2022 were BEVs, that share has been increasing fast year to year.Price is one of the main reasons that people consider when evaluating which financing options they prefer. But ultimately, some drivers may just prefer to get a loan because they want to own the car they drive, while others may just like leasing or PCP options because of the flexibility that they provide.
