Car repossessions rise to the highest level for nearly two years

21st July 2023

Voluntary terminations (VTs), voluntary surrenders and repossessions for cars rose in May 2023 to the highest level for nearly two years according to the Motor Auction Group (MAG).

It is predicted that the figure will rise dramatically over the next 12 months as interest rates and the rising cost of living continues to negatively impact car owners’ disposable income.

VTs and repossessions comprised 57.5% of MAG’s finance company disposals in 2020 when the FCA advised credit providers not to enforce repossessions before 31 July as part of its post pandemic financial support package and 51.5% in 2021.

However, in 2022 that figure fell dramatically to just 14.1%, but during the rest of 2023 and into 2024 MAG anticipates that monthly figure will rise above 50% again.

Zoe Sutton, MAG’s Sales Director said “We have become specialists in collecting VTs and repossessions over the years and the general feeling is that after a period when the market has been relatively starved of volume this is starting to slowly return back to pre-Covid volumes.”

There were two major reasons VT levels dropped in 2022. Firstly, those consumers who were behind with their car finance payments took advantage of the massive rise in used car prices and cashed out halfway through their agreement and got paid the difference.

Secondly consumers took advantage of the circa 30% rise in used prices and sold their vehicle to car buying services rather than voluntary terminating it thus avoiding compromising their credit risk.

Sutton continued “The FCA protection for drivers with a car loan was similar to those provided to homeowners and gave welcome relief for drivers who had lost their job due to the Covid pandemic.  “The rise in used car prices also helped protect a number of drivers from having their credit blacklisted but the market is starting to sense that things are changing.”

“In an ever-changing market where some lenders have closed their books to new business, we could see VTs and repossessions reach pre-pandemic levels later in 2023 because of the continuing challenging economic situation.”