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Who owns the auto finance end consumer?

motor consumer



31st October 2022

man crossed armed smiling at the camera

Jerry Young

The method that consumers use to purchase a new motor vehicle has changed beyond all recognition in recent years.

Indeed, there has been such a revolution that it is now often far from easy to track the relationship between motor finance provider and the end customer who is driving a new vehicle after a purchase has been agreed.

Several factors, including the impact of Covid, the emergence of the Personal Contract Plan and the changing role of manufacturers in the market have combined to create an extraordinary blurring of the once-clear relationship between the finance provider of a new vehicle and their direct customer. Therefore, let’s take this opportunity to analyse just how much the motor finance market has changed over recent years – and look to the future to understand whether these changes will settle down, or continue to evolve over the coming years

Falling vehicle sales

We all know just how devastating the Covid pandemic was on both the used and brand-new car markets – so much so that there is no need to regurgitate the figures once again. It is enough to remind ourselves that with showrooms forced to close and people told to stay away from work, we saw the entire face-to-face sales model decimated.

However, despite the retreat of Covid, and the return to some sense of normality over the last 12 months, sales figures are still far from stable. Indeed, the motor sector continues to face substantial pressure, including the shortage of semiconductor computer chips. This chip shortage has further been exacerbated by the Covid pandemic in important manufacturing and logistics centres in China, along with the disruption caused by Russia’s invasion of Ukraine.

Tellingly, the UK’s new car finance sector appear to have suffered its largest contraction in new business volumes since the pandemic was at its height. New business volumes fell 12% year-on-year overall in the last month of H1 2022 as the new car finance market’s new business declined 21% by value (to £ 1.44 billion) and 28% by volume (to 56,877).

The blurring of the relationship between lender and customer

A key milestone for the change in structure of funding for new vehicle purchases came in 2008 / 2009 when some of the major banks withdrew significantly from the vehicle finance market.

Now, the major structure for the funding of new vehicle purchases is the Personal Contract Purchase (PCP), with captive finance houses (OEMs) funding purchases to those with good credit ratings. Unlike a traditional hire purchase, where the customer repays the total debt in equal monthly instalments over the term of the agreement, a PCP is structured so that the customer pays a lower monthly amount over the contract period (usually somewhere between 24 and 48 months), leaving a final balloon payment to be made at the end of the agreement.

OEM lenders finance direct through their own finance divisions or under a trading style backed by one of the major banks or financial services lenders.

Those customers that don’t meet these criteria for captive finance houses are shared by tier one lenders to tier two or three lenders, where credit is not as solid.

Immediately, we can see here just how complicated the traditional relationship between finance provider and customer has become. And this relationship is set to become even more complicated.

Another aspect of this change, driven by technology, is consumer interest in “subscription based” vehicle leasing. This model bundles together the cost of the vehicle, plus servicing, road tax and even insurance.

Although this model is still in its relatively early stages, the evidence points to massive future growth. This will allow the future penetration of digital integration, providing finance providers with the ability to move their customer service levels up a gear, allowing clients to view all these services easily in an easy-to-read digital dashboard.

As an aside, City investors tend to like this finance model. This is because it guarantees a potentially large base of customers who will lock into a regular and ongoing finance plan.

The impact of online sales platforms

Another major shift in the car financing market can be witnessed by analysing the relationship between manufacturers, retailers, and dealers.

This has been brought about by the move to online retail sales. One example is from the emergence of Cinch, which is part of the Constellation Automotive Group, along with WeBuyAnyCar.com and BCA. 

Another example of change is Motorway, Motorway was founded in July 2017 by Tom Leathes, Alex Buttle and Harry Jones, who had previously created Top10, a broadband comparison site that was acquired by uSwitch in 2010.

Dealers pay Motorway to buy vehicles. Motorway does not charge fees to sellers, when a seller successfully connects with a dealer on their platform, the dealership then pays Motorway a commission fee.

A changing role for manufacturers

Manufacturers are placing an increasing emphasis on direct sales to the end customer, where they can themselves manage the customer relationship during the lifetime of the contract.

This is impacting the role of motor dealers, who are becoming more like agents for the manufacturer themselves, with a bigger part to play in the secondhand market. This addresses the need for those customers wish to touch & feel the vehicle they are buying, and who wish to arrange a test drive before purchasing it.

It is also more profitable for the manufacturer to deal direct, as currently the end price to the customer is controlled by the dealer.

Taken together, these changes result in the promotion of new marketplaces – one for new vehicles, where manufacturers are key, and one for the used car market, where retailers, independent dealers and online sales channels come together and where the business organisation may have a presence in both.

The impact of technology

Third party software developers have played a key role in addressing one important issue for the brand-new vehicle market, namely “equity analysis”. This is the value of the lender’s book after a specified number of years.

Typically, a PCP is taken out over 3-4 years. Therefore, any tools that can provide an accurate equity situation at any point of the agreement is key for the lender, because – just as in many sectors such as the mortgage sector – customer retention is key when it comes to the end of a fixed, or PCP term.

When it comes to vehicles themselves, today’s hardware-defined cars are rapidly transforming into software-defined transportation platforms.

The development of automotive software modules frequently occurs in isolation. An OEM’s in-house team may build some; others are purchased from suppliers or come out of strategic partnerships or joint ventures. Once the full set is available, OEMs or their tier-one suppliers try to stitch the modules together into a proprietary platform.

Software has eclipsed hardware as the main performance driver in today’s cars, with connectivity across domains a critical enabler for new features and connection between OEM and end customer.



The relationship between customer and motor finance provider continues to change, almost beyond recognition. Indeed, there has been a significant blurring in the relationship in recent years.

However, the motor sector must always have an eye on the future. The recent fluctuations in new car sales figures prove that it is just as important to ensure long term security as it is to weather the economic issues of the moment.

That is why the motor finance sector is continually innovating. Such a characteristic should be applauded – it demonstrates an ability to adapt to challenging market pressures.


However, one thing is for sure – based on the evidence we can see all around us, disruption in the sector will continue for a long time to come.

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