The Finance & Leasing Association (FLA) has warned that a “more challenging outlook” may lead to a softening in demand for motor finance.
Geraldine Kilkelly, director of research and chief economist at the FLA, said The consumer new car finance market had got off to an encouraging start in 2026, maintaining the momentum built at the end of last year.
“While the used car finance market began the year more slowly, annual new business volumes remained broadly stable, highlighting the sector’s underlying resilience.
“However, the outlook has become more challenging. Rising tensions in the Middle East are pushing up global energy costs, and inflation is now expected to increase rather than ease, delaying any move towards lower interest rates and placing renewed pressure on household budgets.
“If these cost pressures persist, consumers are likely to become more cautious, leading to softer demand and greater sensitivity to affordability. As conditions tighten, FLA members will continue to support households navigate a more difficult economic environment through the provision of responsibly provided finance.”
Kilkelly’s comments accompanied the FLA release of motor finance data for February.
The consumer new car finance market reported new business up 13% by both January and volume in January compared with the same month in 2025. In the twelve months to January 2026, new business volumes in this market were 9% higher than in the same period in 2025.
The consumer used car finance market reported the value of new business 2% lower in January than in the same month in 2025, while new business volumes fell by 5%.
In the twelve months to January 2026, new business volumes in this market were 1% lower than in the same period in 2025.
