With UK Automotive Set to Boom, Loan and Insurance Markets Brace
We can expect to see a significant surge in both car loans and travel by road as lockdown measures are gradually eased. What does this mean for the automotive industry and the finance sector?
Amidst the many coronavirus-related restrictions and help schemes developed by government and industry, the freeze on car loans reported by the BBC is one of the most interesting and largely ignored. Ostensibly to help buyers to keep their vehicle through financial hardship, it has nevertheless shone a light on interactions between the UK vehicle market and the financial sector. With international travel likely to be subject to continuing restrictions, the humble car will soon be seen in even greater numbers across the isles, creating a challenge – and an opportunity – for the insurance and finance sectors.
Danger on the Roads
A positive benefit of the recent circumstances in the UK has been a huge drop in road traffic accidents and fatalities. With fewer drivers on the roads and an admirable dedication to avoiding danger in order to aid the NHS, the roads have never been safer, according to the Express and Star. However, when driving for all purposes is once again allowed, the roads can expect a huge boom in usage – and therefore accidents. This is already having a notable impact on the insurance sector, already reeling from the volume of claims made against airline companies on refunded or cancelled tickets not paid. Drivers will increasingly be resorting to personal injury legal help in order to gain restitution for a variety of not-at-fault accidents, especially if insurance companies are simply unable to provide the service and return of funds that they would in normal circumstances. With the down tick in this industry, expect the wider financial services industry to sag.
The Finance Sector
With this impact will come a need for greater impetus in the industry – and the amount of drivers back on the road may well create that demand. The amount of cars on the road will not be dictated purely by a need to get out and about, but also a paucity of flights for international travel. Even as prices for UK holidays are predicted by the Evening Standard to explode, cooped-up families will feel little other choice and want to get out and about during whatever summer is left. These holidays lend themselves to automotives, and it’s likely that far more will be purchased over the coming months, giving a healthy and timely boost to the overall health of the industry and the wider financial sector.
Impact on Loans
With car purchases blossoming, so will a lot of vehicle loans. Reuters note that the UK already has an 86.5% rate of private car ownership via finance. This figure will only continue to shoot up with new purchases, especially of smaller family cars destined for those holiday destinations. The effect, then, is twofold – further money pushed into the automotive financial sector, boosting stocks, and more money borrowed from banks, providing impetus both to the financial sector, to the banks, and to local business. Longer-term, this will also help to provide a bit of joy to ailing businesses who had used the government’s loan scheme. Holidays are great for business, and the sheer influx of British people thirsty for some time out of the house can only be good news for industry.
In many ways, internal holiday travel in the UK provides the perfect solution to a battered and bruised financial industry. Powering the way will be cars, giving impetus across several industries by their very purchase. While insurance may continue to suffer, this trend should correct itself long term, giving a much healthier picture of British finance – and especially as it interacts with the automotive industry.