Driving factors behind car purchases
According to the latest AA Personal Loans Car Purchase Index (CPI), there has been a significant change in the reasoning behind car purchases. Six months ago the primary rationale, which was common among 45 percent of respondents, was to replace cars in an attempt to reduce running costs. However, today this is only a factor for 29 percent. The main reason now, as expressed by 44 percent of respondents, is to replace old or damaged vehicles out of necessarily rather than desire.
The Index, which involved 13,000 people being questioned about their intentions regarding car purchases, also revealed that the expensive nature of fuel does not continue to be the chief factor for consideration. This was the case for 56 percent of respondents in October 2008, and the figure has since fallen by 25 percent.
Mark Huggins, AA Personal Loans commented: “The latest CPI research provides a valuable insight into the fluctuations of car buying behaviour. At a time when families are perhaps keeping cars longer, the new Government scrappage scheme could be crucial to kick-start the industry and get people buying again. I believe that the scheme will halt the car sales decline but I would expect to see only a slow recovery over the coming year.
“We have also found that, despite the downturn, the average personal loan for a car has stayed at around £8,000 which means that the scrappage scheme will enable some families to buy a new car for the first time.”
Further CPI findings included the fact that just 12 percent are now in the market for a more environmentally friendly car, whereas in October 2008 this figure stood at 18 percent. It was discovered that 23 percent would think about purchasing a vehicle with low carbon dioxide emissions, but not for ‘green’ reasons. This group would consider doing so as a means to counteracting the financial effects of potential pollution fees, such as congestion charges.
In addition, it would seem that a greater number of people are now spending lower sums of money on replacement cars. In fact, 26 percent revealed their intention to spend between £1,000 and £4,999 compared to 19 percent in October 2008. In relation to sources of finance, 18 percent will go down the personal loan route in order to fund their car purchase.
Homeowners who would like to change their vehicle, but are lacking the funds required to replace it, could consider taking out a secured loan to facilitate this. One of many finance options available, a secured loan could allow the borrower to replace their current vehicle. This may be one with low running costs, it may be environmentally friendly or perhaps that dream sports car. Some people may even be in the market for a second vehicle, so as to avoid car sharing within the family. This could also be funded with a secured loan.
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