What dynamics in the funding market tell us about the health of the used market?

As explored earlier in this edition of Insight Quarterly, the used market is continuing on a path of positive momentum, with supply increasing, values stabilising, and consumer demand strengthening. Building on this, dealer funding behaviour offers a useful lens through which to assess the underlying health of the market. Using proprietary data from NextGear Capital’s dealer base, this article examines how changes in funding strategies reflect the trajectory of the UK’s used vehicle sector.

One of the clearest indicators of growing confidence can be seen in credit limits. In 2025, average credit limits increased by 25% year-on-year. When broken down by dealer type, independent retailers recorded the largest increase at 24%, while franchised dealers experienced more modest growth of 5%. This point of difference suggests that independents are increasing their investments into stock acquisition in response to improving trading conditions.

Credit limits remain a key performance indicator for market health, as they reflect both dealer demand for funding and funder confidence in risk exposure. As a responsible funding partner, NextGear Capital’s underwriting team undertakes extensive analysis when making decisions to increase a customer’s credit limit. As a result, sustained growth in credit availability points to improving credit profiles, stronger dealer performance and increased confidence in the resilience of the used market.

Further supporting this trend, average time on plan was down by 8% in December. Shorter repayment times typically indicate faster stock turn, suggesting that vehicles are selling more quickly than they were a year ago. This may reflect a better alignment between available stock and consumer demand, as well as a market that has adjusted pricing and vehicle mix to meet buyer expectations more effectively.

“Dealer funding behaviour is often one of the earliest indicators of market confidence. When we see credit limits increasing alongside faster stock turn, it reflects both improved risk profiles and a more stable trading environment for used vehicle retailers. These trends suggest the market is adjusting in a measured, sustainable way rather than rebounding too quickly.”

Vehicle values did show a minor increase over the past 12 months. In 2024, the average vehicle cost stood at £7,632, rising by 16% to £8,876 in 2025. Values are a little more complex than other attributes, as an increase reflects the rising price of used vehicles, which are likely adding pressure to dealers’ profit margins. However, it could also indicate that dealers are becoming more comfortable funding slightly higher-value vehicles, supported by stabilising residual values and improved predictability in consumer demand.

Delving into fuel-type data further reinforces the picture of a market settling into a more balanced rhythm. Dealers funded more new energy vehicles than ever before in 2025, with 2,739 EVs and 4,005 hybrids funded throughout the year. This represents a 97% increase in EV funding and a 62% rise in hybrids. While still a smaller proportion of overall volumes, the growth indicates increasing dealer confidence in alternative powertrains as part of a broader, diversified stock strategy.

Taken together, these funding trends point to a used vehicle market that is not only recovering but maturing. Improvements in credit availability, stock turn, vehicle values, and powertrain mix suggest a sector operating with greater discipline and confidence, underpinned by data-led decision-making from both dealers and funders alike.