A hike in the cost of buying a used car is believed to be behind a surge in car finance applications.
Experian said applications for Personal Contract Purchase (PCP) and Hire Purchase (HP) plans rose by 13 per cent month-on-month in March as the new “22” plate launched.
The increase was the highest in March since 2019 and was attributed to low availability of new cars, which drove used car prices up 28 per cent in the first 11 months of 2021.
A shortage of semiconductors, which is used in most new cars, has pushed up the price of used cars, as drivers struggled to replace vehicles.
Experian warned the shortage could mean many consumers are overpaying for used cars, with some costing 53 per cent more than they were a year ago.
The credit score provider said rising and car prices and fuel prices would put added pressure on motorists to cut costs.
John Webb, credit expert at Experian, said: “We’re all eager to resume some normality, whether that’s returning to the work commute or travelling further to see family and friends. This is leading to an increase in demand for new cars.
“However, as we’re all very aware, the cost of living is rising rapidly. With all of the extra pressures on household budgets, it’s worth considering how to get the best possible deal on your car insurance.”
How to save on car insurance
Despite rising costs, there are ways motorists can save on their car insurance.
- Having two drivers on the policy can help save an average of £63 on premiums a year.
- Aim to renew your car insurance with three weeks to spare as quotes run three or more weeks before renewal on average see a £299 lower premium than those made on the day of renewal.
- Where the car is parked during the day can reduce costs: Quotes for vehicles which are parked in the office car park during the day on average have a £90 lower premium than quotes for vehicles parked elsewhere.
Meanwhile, quotes for vehicles parked in a driveway during the day have a £66 lower premium than quotes for vehicles parked on the street.
Quotes where vehicles are parked in the driveway during the night on average also have a £88 lower premium than those for parking on the street.
Experian added quotes for vehicles which have already been bought are on average £202 cheaper than quotes for vehicles which haven’t yet been purchased.
- Advanced driving courses don’t always reduce costs – the average premium for drivers with additional qualifications is only £7 cheaper.