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Consumer Automotive Financial Services in the UK

  • March 2016
  • -
  • Finaccord
  • -
  • 65 pages

Consumer Automotive Financial Services in the UK investigates the market for automotive financial services linked to sales of new and used passenger cars to individual buyers in the UK. In addition to analysing the market for finance and leasing services, the study also covers motor insurance, road assistance, extended warranties, prepaid service contracts, GAP insurance, minor damage insurance, MOT protection and tyre insurance.

Using survey results for average take-up rates for finance and leasing propositions at the point of sale, data for the size and growth of the automotive finance and leasing market for consumers in the UK is provided in terms of gross advances and assets leased for 2011 to 2015 with splits between finance for new and used cars and between finance organised through dealerships at the point of sale and directly with banks or other lending or leasing providers.

Moreover, also by means of data for average take-up rates, the markets for motor insurance, road assistance, extended warranties, prepaid service contracts, GAP insurance, minor damage insurance and tyre insurance are sized in terms of gross written premiums and other revenues sold through the automotive trade (i.e. via dealers and manufacturers) in 2015. These markets, estimated to be worth GBP 1.86 billion in total in 2015, are broken down between new and used cars, and between new contracts sold during 2015 and in-force business sold in previous years but still being renewed in 2015.

The report draws on a survey of 80 leading car dealerships as well as an analysis of the approach to consumer automotive financial services of 47 car manufacturer brands in the UK. The PartnerBASE™ dataset that accompanies the report details each of the marketing initiatives for consumer automotive financial services traced by Finaccord for both dealers and manufacturers; a market data annexe is also available in a convenient spreadsheet format so that there is no need to re-enter key data points from the report.

In addition to captive finance companies owned by manufacturer brands, organisations covered by the report include the AA, Ageas, AutoProtect, Aviva, Barclays Partner Finance, Black Horse, Car Care Plan, Close Motor Finance, eDynamix, EMaC, Evolution Funding, iGO4 Partners, MAPFRE ABRAXAS, MotoNovo, Motorway Direct, Northridge Finance, Original Insurance Services, Premia Solutions, QBE, the RAC, Santander Consumer Finance, Smart Insurance, The Warranty Group, UK General and Zuto. Together, the report and database will provide you with the definitive guide to current and future opportunities in consumer automotive financial services in the UK.

Table Of Contents

Consumer Automotive Financial Services in the UK
0.0 EXECUTIVE SUMMARY . 1
1.0 INTRODUCTION 3
What is this report about? 3
The focus of the report is on financial services related to the sale of passenger cars to individuals 3
Rationale . 3
The provision of financial services is essential to support both car sales and profitability 3
This report offers a detailed updated analysis of the subject in the UK based on primary research 3
Methodology . 3
Survey of dealers and manufacturers 3
Market data . 5
Computation of market data is based on a complex set of assumptions and variables… . 5
…in order to provide market segmentations in unrivalled detail 5
External sources . 6
Definitions . 6
Finance and leasing products 6
Insurance, warranty and assistance products . 7
Operating models . 8
Tied and non-tied providers 8
Abbreviations 9
Exchange rate . 9
PartnerBASE and market data annexe 9
Finaccord 9
2.0 MARKET ANALYSIS . 11
Introduction . 11
Passenger vehicle data . 12
The UK's new car market has been buoyant in recent years 12
Almost 20% of new car sales are due to manufacturer groups outside of the top ten 13
Consumer automotive finance and leasing market 14
Market size and growth 14
Point-of-sale finance for new cars expanded rapidly between 2011 and 2015… . 14
… with its value having more than doubled over this period of time 15
Types of finance and leasing product 17
Two products dominate point-of-sale finance in the UK… . 17
… with PCPs having increased in popularity 17
Consumer automotive insurance, warranty and assistance markets . 18
Market sizes 18
In total, the automotive trade is likely to have sold contracts worth nearly GBP 2 billion in 2015 . 18
Regulatory intervention has yet to puncture the GAP insurance market. 18
Survey of automotive dealers and manufacturer brands - overview 21
Introduction 21
Provision of consumer automotive financial services . 21
Seven-day motor insurance policies are increasingly distributed by dealers 21
Prepaid service contracts are on offer from more than 80% of dealers 21
MOT protection is quite commonly promoted by manufacturer brands but not by dealers 21
Number and nature of dealer schemes . 23
UK dealers are most likely to employ multiple providers for finance and leasing . 23
Types of motor insurance policy sold by dealers 25
Where motor insurance is available from car dealers, this is always for comprehensive cover . 25
Sources of road assistance distributed by dealers . 26
Road assistance is most commonly packaged with factory and extended warranties . 26
Consumer uptake of automotive financial services through dealers . 27
Take-up rates for point-of-sale finance in the UK have risen for both new and used cars . 27
Seven-day motor insurance cover is also increasingly acquired from dealers by car buyers… 27
… as are prepaid service contracts 27
Purchase of extended warranties is mainly limited to buyers of used cars in the UK . 27
Survey of automotive dealers and manufacturer brands - partnerships . 29
Introduction 29
Finance and leasing 30
Black Horse remains the dominant non-tied provider of point-of-sale finance… 30
… albeit there is rising competition from a range of different providers… . 30
… such as MotoNovo and Evolution Funding as well as Santander and Barclays 30
Three manufacturer brands utilise more than one partner for finance and leasing 32
Black Horse provides white-labelled vehicle finance for six manufacturer brands… 32
… as do four other external finance providers 32
RCI Banque's business in the UK has expanded quite rapidly in recent years 32
Several manufacturer groups offer finance and leasing services in the UK via joint ventures . 32
In the combined analysis, Black Horse emerges as the likely market leader . 34
Motor insurance 35
The vast majority of dealers only distribute the policies of their manufacturer brands 35
Allianz is the leading underwriter in this field… . 37
. and benefits both from direct partnerships and ones intermediated by Original Insurance Services… . 37
… with which it began collaborating in the first quarter of 2015 . 37
Ageas, Aviva, iGO4 Partners and UK General are other significant competitors in this sector . 39
Extended warranties . 40
At least six non-tied providers of extended warranties are active in the UK market . 40
Allianz Global Assistance and Car Care Plan are the leading providers through manufacturer brands. . 42
.with two other external providers having picked up mandates for extended warranty schemes 42
The leading provider holds over a quarter of the market in the combined analysis 44
Road assistance . 45
A small number of dealers distribute the RAC's stand-alone road assistance policies… 45
… and there is also evidence for usage of regional non-tied providers . 45
Three main competitors vie for manufacturer brand mandates for road assistance . 47
GAP insurance 49
There are numerous non-tied providers of GAP insurance competing to distribute through dealers… 49
.probably led by MAPFRE ABRAXAS, Car Care Plan and Premia Solutions 49
MAPFRE ABRAXAS also holds the highest weighted share of manufacturer brand partnerships… . 51
… with five other providers having picked up deals in this sphere 51
The combined picture is one of a comparatively fragmented market 53
Prepaid service contracts . 54
EMaC is the dominant provider of non-tied products… . 54
… and will seek to continue growing at a healthy rate following acquisition by Innovation Group . 54
Most manufacturer brands and groups reportedly operate prepaid service contracts on an internal basis 56
Minor damage insurance 58
Premia Solutions is the most heavily used provider of minor damage insurance… . 58
… albeit there are at least seven other non-tied competitors in this arena… 58
.and several firms working for this product with manufacturer brands. 60
MOT protection . 62
Few dealers offer MOT protection and none work with non-tied providers for it… . 62
. meaning that this small market is seemingly dominated by manufacturer-branded schemes . 62
Tyre insurance 64
Dealers mostly use independent providers for tyre insurance, led by Premia Solutions. . 64
.since just two manufacturer brands have set up an official scheme 64

LIST OF GRAPHICS / TABLES
0.0 EXECUTIVE SUMMARY . 1
Key market data for consumer automotive financial services in the UK, 2015 2
1.0 INTRODUCTION 3
2.0 MARKET ANALYSIS . 11
Passenger car parc and new / used passenger car sales in the UK, 2011 to 2015 12
Passenger car parc and new / used passenger car sales in the UK, 2011 to 2015 (table) . 13
New passenger car registrations in the UK, segmented by manufacturer group, 2015 13
New and used passenger car finance market in the UK, segmented by distribution channel: volumes, 2011 to 2015 . 14
New and used passenger car finance market in the UK, segmented by distribution channel: values, 2011 to 2015 15
New and used passenger car finance market in the UK, segmented by distribution channel: values and volumes, 2011 to 2015 (table) . 16
% split between the different types of finance and leasing contract organised at the point of sale in the UK, 2015 17
Total revenues from consumer automotive insurance, warranty, assistance and service contract markets in the UK, 2015 . 19
Total revenues from consumer automotive insurance, warranty assistance and service contracts in the UK, 2015 (table) . 20
Comparison of the provision of each type of automotive financial service by dealers and manufacturer brands in the UK, 2016 22
Average number of tied and non-tied schemes organised by dealers for each type of automotive financial service in the UK, 2016 (table) 23
Average number of tied and non-tied schemes organised by dealers for each type of automotive financial service in the UK, 2016 24
% split between the different types of motor insurance policy sold at the point of sale in the UK, 2016 . 25
% availability of road assistance through factory warranties, annual service, extended warranties, motor insurance, prepaid service contracts and as a stand-alone product in the UK, 2016 26
% of new and used car purchasers acquiring each type of automotive financial service at the point of sale in the UK, 2016 . 28
Provision of finance and leasing by dealers in the UK, 2015: provision rate, product sources and provider share of non-tied partnerships . 31
Provision of finance and leasing by manufacturer brands in the UK, 2015: provision rate, operating models and weighted provider share of partnerships 33
Implied market shares of new business for finance and leasing at the point of sale in the UK, 2015 . 34
Provision of motor insurance by dealers in the UK, 2015: provision rate, product sources and provider share of non-tied partnerships . 36
Provision of motor insurance by manufacturer brands in the UK, 2015: provision rate, operating models and weighted provider share of partnerships . 38
Provision of extended warranties by dealers in the UK, 2015: provision rate, product sources and provider share of non-tied partnerships . 41
Provision of extended warranties by manufacturer brands in the UK, 2015: provision rate, operating models and weighted provider share of partnerships 43
Implied market shares of new business for extended warranties at the point of sale in the UK, 2015 . 44
Provision of road assistance by dealers in the UK, 2015: provision rate, product sources and provider share of non-tied partnerships . 46
Provision of road assistance by manufacturer brands in the UK, 2015: provision rate, operating models and weighted provider share of partnerships . 48
Provision of GAP insurance by dealers in the UK, 2015: provision rate, product sources and provider share of non-tied partnerships . 50
Provision of GAP insurance by manufacturer brands in the UK, 2015: provision rate, operating models and weighted provider share of partnerships . 52
Implied market shares of new business for GAP insurance at the point of sale in the UK, 2015 53
Provision of prepaid service contracts by dealers in the UK, 2015: provision rate, product sources and provider share of non-tied partnerships 55
Provision of prepaid service contracts by manufacturer brands in the UK, 2015: provision rate, operating models and weighted provider share of partnerships 57
Provision of minor damage insurance by dealers in the UK, 2015: provision rate, operating models and weighted provider share of partnerships . 59
Provision of minor damage insurance by manufacturer brands in the UK, 2015: provision rate, operating models and weighted provider share of partnerships 61
Provision of MOT protection by dealers in the UK, 2015: provision rate and operating models . 62
Provision of MOT protection by manufacturer brands in the UK, 2015: provision rate, operating models and weighted provider share of partnerships . 63
Provision of tyre insurance by dealers in the UK, 2015: provision rate, product sources and provider share of non-tied partnerships . 65
Provision of tyre insurance by manufacturer brands in the UK, 2015: provision rate, operating models and weighted provider share of partnerships . 65

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