An increasing number of motorists using motor finance are changing their cars before the end of their finance agreement, according to figures from Experian Automotive.

The motoring and car ownership information arm of the Experian credit reference agency has highlighted that at present new cars are changing keeper on average seven months – 18 months for used cars – before the original finance term was due to end.

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Comparing these figures against those for 2007 and 2009, Andrew Ballard, principal consultant at Experian Automotive, said the firm had "noted a s ignificant shift in how long motorists were keeping their cars in relation to their finance agreements".

In 2009, new cars changed registered keeper on average five months after the end of the agreement and used cars one month before the agreement was due to end. In 2007, new vehicles changed keeper 13 months after finance ended, seven months afterwards for
used vehicles.

Despite this diminishing length of ownership, the Experian analysis has also demonstrated longer-term agreements are still the most popular, with more than 80% of motorists opting for average car loan terms of longer than 26 months.

The percentage of those vehicles to have an early keeper change in 2009 was 35%; in 2007 it was 28% and in 2012 it was 54%.

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‘Significant shift’

Although hire purchase still dominates finance, making up 86% of agreements in 2012, PCP has more than doubled its share of the market in the period studied, from 6.12% in 2007 to 13.69% in 2012. Ballard said he believed PCP arrangements are more likely
to run to term as the purchaser can assess the end-of-agreement terms at the outset and would have already considered whether to purchase the vehicle outright at the termination of the agreement.

"The data suggests a significant shift in the way in which people are choosing to manage their finance agreements," explained Ballard. "The preference towards longer terms and the increase in PCP agreements suggests a need to keep initial outlay and regular
motoring costs low.

"However, the fact that the vehicle is then changing hands prior to the end of the finance agreement is an interesting twist as you would expect people to hold on to their vehicles for longer.

"As well as possible financial reasons causing people not to keep the vehicle in line with the finance agreement, it may also be due to the subsidised finance deals and incentives available encouraging people to change earlier."

Ballard suggested the findings highlight the need for car retailers to stay engaged with their customers to "ensure that their customers’ motoring and financial requirements are handled appropriately, offering the right deal at the right time".

richard.brown@timetric.com