Volkswagen's Irish lending up by a third as demand rises for car finance
More than a third of all new cars sold by Volkwagen Group in Ireland are now financed by the car company's in-house bank, as non-traditional financing methods drive the market for new and used cars to pre-bust heights.
Personal Contract Plans (PCPs) are among the other new types of financial arrangements which are driving steady growth in car sales.
The banking arm of Volkswagen is reporting a 39pc increase - to €340m - in the amount of new-car financing taken up by Irish motorists so far this year.
The substantial increase on the €245m loaned over the same period in 2015 reflects a big increase in new-car registrations for the first seven months of 2016.
The figure is just €10m short of the €350m loaned by banks to Irish motorists for 2015 - which in itself was up 53pc on 2014.
The Volkswagen Group, whose parent company has been embroiled in an emissions scandal for the past 11 months, is the single biggest seller of new cars on the Irish market.
Its brands include Audi, SEAT, Skoda and Volkswagen.
These four brands account for around 30,000 of new models sold this year. That equates to 23pc of the entire market. Since it provides finance for 38pc of the new vehicles it sells, Volkswagen Bank now finances nearly 9pc of all new-car sales in Ireland.
Increases in motor-based lending by other non-traditional outlets are similarly expected this year as consumers switch from more traditional methods of financing.
The new-car market growth has been fuelled most particularly by the widespread take-up of PCPs. These contracts allow motorists, who pay a typical 20pc deposit or trade-in value, to drive a brand new vehicle for three years for a fixed monthly repayment, with an agreed minimum value on the vehicle guaranteed at the end.
When the three-year term ends, the motorist can decide to buy the car outright, sign up to take a new car for another three years or hand back the keys and walk away. "This removes the depreciation and negative-equity risk and provides comfort for the customer," said Volkswagen Bank Ireland's head of sales Conor Threadgold.
Overall increases in such finance deals have contributed in a major way to the 19.4pc rise in new-car registrations over the first seven months of the year.
According to official SIMI statistics, 131,264 new cars were registered in that period. July registrations outstripped the equivalent month in 2015 by 8.47pc to 29,931.
As a result of increased business, Volkswagen is creating several positions in Ireland.
It currently employs 69 and expects that to grow to 75 by the end of the year and increase further in 2017.
The bank also recently unveiled a new motor-insurance package for its Up! and Polo models. The 'pilot' project is for those aged 21 and over who have three years no-claims bonus and a full Irish driving licence. The key provision is that they have to finance their new car through Volkswagen Bank.