Recent data released by the Finance & Leasing Association (FLA) indicates a noteworthy trend in the consumer car finance sector, showing a 2% decline in new business volumes for February 2025 when compared to the same month in 2024. This decline poses questions about consumer sentiment and spending habits in an ever-evolving economic environment.

Interestingly, despite the decline in volume, the overall value of new business in the consumer car finance market recorded a 5% increase during the same period. This suggests that while fewer transactions are taking place, the transactions that are happening may involve higher-value purchases or financing options.

In the consumer new car finance market specifically, there was a significant uptick in February 2025, with new business value soaring by 19% and new business volumes rising by 17% compared to February 2024. This growth could be attributed to consumers making strategic purchases ahead of anticipated increases in vehicle excise duty set to take effect in April 2025, prompting buyers to act sooner rather than later.

However, the consumer used car finance market presents a contrasting narrative. It faced a 1% decrease in the value of new business in February 2025 relative to February 2024, while new business volumes fell by 7%. This decline suggests a potential slowdown in the used car market, which is often seen as a barometer for broader automotive trends. Over the first two months of 2025, the new business volumes in this sector were recorded at 7% lower than during the same period in 2024, further emphasizing the challenges faced in this area.

Geraldine Kilkelly, FLA's director of research and chief economist, commented on the findings, stating, The consumer new car finance market continued to grow in February, supported in part by consumers bringing forward purchases to get ahead of the hikes in vehicle excise duty from April. While the consumer used car finance market reported another month of lower new business volumes, both markets continued to see growth in average advances.

Kilkelly also highlighted the impact of external factors on consumer behavior, noting, The US administrations tariff hikes have weakened an already soft economic outlook. Uncertainty about jobs and higher inflation in the coming months are likely to weigh further on consumer confidence and spending. She forecasts that the value of new business within the consumer car finance market is expected to grow by 1% in 2025, with a predicted 5% growth in the consumer new car finance market being offset by a 2% decline in the consumer used car finance market.

Looking back at January 2025, consumer car finance new business volumes had already seen a decrease, dropping by 3% compared to January 2024, while the value of new business managed to grow by 4%. Over the 12-month period leading to January 2025, the overall new business volume was 2% lower than during the same timeframe in the previous year, further highlighting a potential trend of declining transaction volumes.

This data was originally reported by Motor Finance Online, a brand owned by GlobalData, and serves as an essential indicator of the current health of the consumer car finance market as it navigates various economic challenges.