New car finance APRs hit double digit average

The high cost of finance is not holding back new car sales in the UK, but the average annual percentage rate (APR) for retail offers has broken into double figures at 12%. This compares with an average APR of 7% in Q4 2022.

The Bank of England is expected to increase interest rates further above the current 4% and so APRs for retail offers should be expected to increase in line.

However, these high APRs are not impacting new car registrations so far, with the sixth consecutive month of growth continuing with the 14.7% rise in January. The average monthly payment for a personal contract purchase (PCP) has also increased by 7.7% to £432 compared with the last three months of 2022. However, the cost of entry to access these retail offers in Q1 has lowered by nearly 17% with average deposits now at £6,487.

There is some additional good news that car manufacturers have also increased the level of deposit contributions to an average of nearly £1,120 – an increase of 18.4% compared with Q4. So, while the monthly cost and APRs are higher, customers are having to put down a lower level of deposit and are getting more assistance from car brands to keep accessing the latest models. The Hyundai i20 takes the crown in Q1 for the lowest priced monthly offer in AM’s compiled data at just £133.59 a month.

The MG3 is close behind at £159, followed by the Hyundai Bayon at £170.

All of the top 10 lowest priced models are pitched at less than £200 a month and, as always, despite the increasing costs seen across the market, there are still many affordable deals to tempt new car customers. MG continues its domination of the affordable electric vehicle (EV) market offering the top three most affordable EVs in Q1 with its MG4, ZS and MG5 models all below £300 a month.

The Renault Zoe deserves a mention as it’s tied with the ZS and MG5 at £299 a month, but it’s also one of the few cars available in Q1 with 0%.

Zero percent finance is usually a common feature within the new car offers market, but its presence has been becoming more and more scarce as the cost of borrowing has increased. Renault and Ford are still offering 0% on models like the Arkana, Clio, Captur, Fiesta, Focus, Ecosport, Kuga and Mustang. Dacia continues to make an appearance among the brands with some of the lowest deposits needed to access new car finance.

This includes a simple campaign where the deposit matches the first monthly PCP payment level. The Fiat 500 mildhybrid can also be accessed at £199 a month with just a £950 customer deposit.

The premium and premium volume brands usually have the biggest scope to reduce prices to move metal and it’s no different in Q1.

Chunky deposit contributions on certain models from Audi, Jaguar and Volvo are all available to help convince those with higher incomes and more savings to finance a new car before the end of March.

The A7 Sportback has been reduced by £5,750, taking the prize for the biggest price reduction in Q1. The Jaguar F-Type is close behind with a £5,500 reduction.

Volvo is offering £5,000 off its V90, XC90 and S90 in Q1 in order to help get those models moving in the plate change.

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