In recent years, the car finance industry has faced many challenges, from the Covid-19 pandemic to the cost of living crisis. Customer behaviours have transformed within the last few years and undergone significant change, so where do we stand now in this ever-changing industry?

In this blog, we will cover the cost of living crisis, how this has influenced customer behaviours and the impact of the Covid-19 pandemic on the industry. The car finance industry and customer behaviour will likely continue changing as society adapts to an ever-changing socio-economic situation.

A two way motorway is empty, with overcast sky and the picture taken from above.

The influence of the Covid-19 pandemic on customer behaviour

The Covid-19 pandemic transformed the car finance industry and the whole economy, with forced lockdowns bringing businesses to a halt and kickstarting the e-commerce industry. Growth in online purchases dramatically influenced the car finance customer journey, becoming almost fully online, owing to lockdown and social distancing. This presented a unique challenge for car finance providers and car dealerships in moving to a nearly entire online customer journey, a stark contrast to years before. Fast-forward to today; customer behaviour has switched yet again as customers begin to return to normality. Regarding the current customer journey, customers are looking for more of a blend between the online journey and the in-store experience. The ability to apply and receive a decision online, with an in-person visit to see and test the car, ensures that the customer can enter a car finance agreement at their leisure and control every step. Online applications are predicted to account for every one-in-two finance application during 2022, according to figures published by iVendi in AM Online.

The constant evolution of smartphones and online banking has allowed many customers to provide credit information from the comfort of their homes, and car finance companies must live up to this demand. The ability to open bank is a significant step forward for customers and a fantastic opportunity for car finance companies to strengthen their customer offerings. According to an article in AM Online, open banking is expected to be the most dominant form of payment in car dealerships by 2030. The number of open banking users is growing at a rate of 1 million every six months, and the growth is only expected to accelerate.

During the pandemic, car finance grew in popularity as customers looked for a short-term option they did not need to own at the end of the agreement. This upward trend has continued into the cost of living crisis.

A small red toy car sits on top of coins ascending from left to right, with blurred greenery in the background.

The cost of living crisis and its impact on customer behaviour

In a previous blog, we addressed the influence of increasing interest rates on the car finance industry. Read this here.

The cost of living crisis has and is currently providing challenges for the car finance industry. The blow to household incomes combined with future uncertainty has influenced customer behaviour massively. A dip in household pockets has increased demand for car finance as customers look to avoid an outright purchase and make payments in instalments. What Car? surveyed 1,060 in-market buyers and found that 25.8% of customers were now more likely to purchase car finance than buy a car outright. They also found that personal contract purchase (PCP) and hire purchase (HP) agreements were still the most popular, with 63.4% choosing either of these options. An influx of customers will undoubtedly alter the customer journey as a new wave moves through the car finance process. This demand is expected to only continue, with a 5% increase from 2020 to 2021 and a subsequent 8% increase in new business volumes during the first eight months of 2022. This influx of customers, some from the car buying process, will bring expectations of a customer journey that car finance may not service. With this in mind, car finance companies must be alert to new customers and their differing desires to existing car finance customers who are already used to the financing process.

As part of the cost of living crisis, the Bank of England’s interest rates increased to combat spiralling inflation. This increase has made car finance companies more cautious, leading to a rise in application rejections. Lenders must know that customer behaviour may change in response to application rejections, and flexibility and support are imperative. In line with this, customers will always prefer a soft credit search. During this cost of living period, the ability to enquire at multiple places and avoid a mark on their credit file is essential. While household budgets are low, browsing car finance deals is imperative to getting the best deal. Customers faced with a hard credit search will not only receive a mark against their record but will also be put off from searching for the best deal. As car finance providers, we must support customers wherever possible, and the ability to undergo a soft search is now more critical than ever.

A word from our partners

Recently, our Regional Account Manager, Jason Hanford, contacted partners for their say on consumer behaviour in society today.


Hassan Deen

Director – Car Finance Limited

More and more customers now enter the car finance process with an idea of what they want, with budgets very fixed. These tight budgets tend to dictate the whole process, and if a cheaper price can not be found, customers will go elsewhere.

The online car finance journey is now everything, mobile apps are massively important, with videos and photos of the cars essential to customers seeing the car without leaving their home. Many customers now buy cars before leaving their home, with the ability to see payments online dictating whether customers stay or leave your site.


Imran Kassim

Sales Manager – Carplus

Customers are generally surprised by the increase in interest rates. We tend to receive a lot of enquiries, but the sales process is slowing down during a volatile period for customers. Lenders are tightening their criteria, which is of course having repercussions for customer confidence and sales figures.

Due to Covid-19, online buying has increased, with more upfront buying taking place. It is now easier than ever to buy a car online.

People are now more aware of their budgets and are more concerned by their financial situation. Comparison sites have become even more important, as customers look for the cheapest option. On top of this, customers are now looking a lot more at the running costs of cars.


These quotes emphasise the uncertainty caused by both Covid and the cost of living crisis, with customers now taking more control of the customer journey. Increased online car buying highlights the need for organisations to optimise their online customer journeys, whilst rising doubts should trigger more support from lenders at this time. Putting the customer first has never been more critical. They seemingly have taken even more of an interest in the financial intricacies of the car buying/financing process as they look to get the best deal possible.


To summarise, consumer behaviour has and always will be myriad feelings and demands. The last few years, however, have shone a spotlight on consumer behaviour and the importance of car finance entities in servicing demand. The increase in scepticism brought on by Covid and the cost of living crisis requires organisations to be more understanding of customer needs and tighten customer care processes to offer as much support as possible from case to case. An essential point to end is the significant growth in the industry due to it being a cheaper, more cost-spreadable alternative to car buying. With the staying power of online services, the market will only grow. This growth will change consumer behaviours as new customers enter the market.