SURGING prices for new and used motors, factory delays and rising interest rates on loans are pushing the country to the brink of a car crisis.
Now experts fear that many will fall behind on loan repayments because of the cost-of-living squeeze.
Amber Leach says a shortage of options led to difficulty securing a good deal on her car lease
The price of used cars has risen for 29 consecutive months, with them now costing on average 30 per cent more than before the pandemic.
A second-hand Peugeot 107, for example, now costs on average £3,652, up from £2,550 a year ago, according to Auto Trader.
Meanwhile, prices for new cars have risen 26 per cent, with manufacturing delays leading to long waiting lists.
There’s a wait of 41 weeks for a new VW Golf or 36 weeks for a Nissan Micra, reports motor trader carwow.co.uk.
Interest rate rises are pushing up costs further for buyers who are reliant on finance.
Adrian Dally, of the Finance & Leasing Association, says: “There is a cost-of-living crisis and ultimately there will be people who run into difficulty.”
SOARING PRICES MEAN BIGGER DEBTS
Buyers are already taking on larger loans in order to secure the vehicles they need.
The average used car loan has increased from £7,500 two years ago to £8,700 now.
Lucy Sherliker, of lender Zuto says: “Customers are borrowing on average £1,200 more than they were two years ago.”
She added that many people are opting for second-hand cars rather than waiting for new ones, pushing up prices and increasing the amount of money being borrowed.
Interest rates on car loans have already begun to creep up, so new borrowers are having to pay more, and Adrian Dally says this is likely to continue.
WHAT TO DO IF YOU ARE STRUGGLING WITH PAYMENTS
Nine out of ten new cars in the UK are bought using finance, while more than four in ten used car buyers take out loans.
It means many drivers have ongoing monthly costs, and debt counsellor Sara Williams, founder of support website Debt Camel, says many are finding the payments “hard to manage”.
One option, she says, is to hand back the car — known as “voluntary termination”.
But even if you do, you may still owe money if you’ve repaid less than half the loan.
And if you miss repayments, your car can be repossessed.
Sara suggests speaking to a debt counsellor if you are struggling, especially if you depend on your car for work, mobility or caring responsibilities.
She says in some cases you might be better off agreeing to a payment plan on credit cards or other unsecured debts to help you afford your car loan repayments and keep your vehicle.
Sue Anderson, at debt charity StepChange, says that your rights will vary when struggling with car finance payments, depending on the type of loan you have.
When you buy a car through hire purchase, it belongs to the lender until you have made all the agreed payments.
She says: “This means you’re not allowed to sell it. You should contact your lender as soon as possible to let them know you’re having difficulty paying, as you may be able to arrange a payment holiday, or negotiate a more affordable payment plan.”
If you have a good credit rating, you may be able to buy a used car with an interest-free credit card and pay in instalments before the rate rises.
If a dealer lets you buy with a credit card, you could claim against the lender if the car turns out to be faulty.
This could be useful if the dealer goes bust or refuses to take responsibility.
WHAT’S NEXT FOR CAR PRICES?
THERE is little prospect of respite from rising car costs, as demand for used and new motors still outstrips supply.
The average price of a used car in August was £17,039, and Auto Trader’s director of data, Richard Walker, says there is no sign of a slowdown.
Even though there is a cost-of-living crisis, over three quarters of people who responded to a recent Auto Trader survey said their car purchase was a necessity, rather than a luxury, suggesting that demand is unlikely to drop.
But there is some light at the end of the tunnel — the number of cars built in the UK has risen for the third consecutive month.
But competition among buyers for second-hand cars is expected to remain strong, meaning used car prices are likely to stay high.
Walker says: “We remain confident of continued consumer demand.
Coupled with ongoing supply challenges in both the new and used car market [mean that] prices will remain strong for the foreseeable future.”
‘THE MARKET IS JUST BONKERS’
Amber Leach says the car market ‘is bonkers at the moment’
WEDDING photographer Amber Leach relies on her car to get to venues across the country with all her equipment.
The 40-year-old lives in Plymouth with husband Jesse, 36, a life coach, and children Ruah, two, Thomas, nine, and Libby, 13.
For Amber, leasing a car through her photography business, Liberty Pearl, was the obvious solution – and she managed to close the deal on a three-year deal just in time, before prices rocketed.
She says: “This has been my third lease car, because I need a very reliable vehicle to get to weddings all around the country.
“I also need it to be very smart because I drive brides and grooms to locations.
“We started looking in January, but there was a real shortage of brand-new cars because of Covid.
“We couldn’t get a second-hand one because you can’t lease these through a business. We were looking for months.”
Eventually she tracked down a deal on a new electric Hyundai Tucson, which had already been loaded on to a ship for delivery, but the buyer had cancelled his order at the last minute.
Amber was able to secure a three-year lease on it.
But when the car arrived four weeks later, she tried to extend the lease to five years.
That’s when she found out that prices had rocketed.
She says: “I was told if I got a new deal with a five-year lease, it would cost me £100 more every month for the same car, because it had gone up by so much in that time.
“So we stuck with the deal we already had.”
She pays £360 a month for the car, plus VAT, and said: “An extra £100 would have been a significant difference.
“The car market is just bonkers at the moment.”
‘WE WANT ELECTRIC CAR BUT CAN’T AFFORD IT’
Vicky and Chris Saynor say an electric car is simply too expensive
WITH four children to ferry around, Vicky and Chris Saynor looked at replacing their diesel Land Rover Discovery with an electric car to cut back on their fuel costs – but can’t afford the asking price.
The couple, both 46, of Cottered, Herts, together run holiday cottage rentals through their company Bethnal & Bec, and live with children Poppy, 17, Felix, 14, Mylo, 12, and Willow, one.
Vicky says of her current vehicle: “It’s a real gas-guzzler, and it has now reached a point where we can’t ever fill our tank up completely because the fuel is so expensive.”
But since the couple started looking at electric cars at the beginning of the year, the prices have shot up.
They had been hoping to pay between £370 and £400 a month for an electric Mini Cooper.
But by the time they looked again, the cost was over £600.
Vicky adds: “We can’t believe how much the costs have gone up. It’s really disappointing.”
The couple have now put off changing their car until it gets cheaper.
