How we’re borrowing more for our new cars from big four ‘banks’

Published on 9 February, 2022

Overview

We borrowed hundreds of millions from the country’s four ‘motor banks’ last year, despite the pandemic.

This can be revealed after the banks operating here responded to our queries on amounts loaned for a car last year.

Some gave greater detail than others due to the highly-competitive and sensitive nature of the business.

Last year, BMW Financial Services Ireland loaned a total of €279m, according to managing director Brian Merrigan.

The average financed amount on new and used BMW and Mini cars increased to €33,400 from €30,400 in 2020.

BMW and Mini Select, which are Personal Contract Purchase (PCP) plans, are the most popular product for new motors.

Mr Merrigan said that’s because of the Guaranteed Future Value, or MFV.

He said these products can be a flexible alternative by deferring a proportion of the car’s total value until the end of the agreement as an optional final payment.

Used-cars tend to be financed with traditional HP finance.

As well as providing finance to retail customers, Mr Merrigan’s company has PCPs for limited companies and sole traders as well.

The amount loaned in 2021 was up by €43m year on year.

The average spend on new BMWs and Minis that were financed was €49,000.

Of those customers who opted for finance, the average term was for 44 months on new and used BMWs and Minis.

The most popular cars financed reflect the overall sales trends (in other words, the big-selling 5-series and X5), while 38pc of all new cars sold were electrified. Total PCP was 64pc while 34pc were financed with HP. Only 2pc were financed contract hire.

Brian McNulty of Renault Bank told us it loaned €155m last year, financing nearly 9,000 (8,855) Renault/Dacia new and used vehicle customers.

This is almost identical to 2020 when it financed around €500,000 more.

The average amount financed is up by 0.5pc to €17,500 (new and used).

Lending on electric vehicles has increased by 159pc and is financing more than €8.3m.

The vast majority of that sum was at 0pc finance.

Of retail PC contracts, 61pc of customers choose their PCP option.

Toyota Financial Services says it accelerated its loan growth last year with a 20pc increase compared with the 2020 figures.

The average finance amount for a new car with Toyota was €23,500.

PCP accounts for 63pc of the new business, with 37pc of new car customers opting for hire purchase.

Volkswagen says that last year as many as one-in-two of the group’s customers took out a financial services contract (finance and lease).

And 58pc of those who bought a new car also took servicing with their finance or lease contract.

This seems to be a trend as it was up from 50pc in 2020.

More than half (55pc) of new car deals involved people taking on a PCP.

Volkswagen Financial Services Ireland said it had “healthy results” for the year just gone, lending €358m.

Of that amount, 76pc was for Personal Contract Plans (PCP).

The average finance on a car was €26,843 (new vehicle only).