DEMAND for car leasing finance continues to grow as a result of the August 1995 VAT changes, according to new figures from the Finance & Leasing Association.

FLA figures for February reveal a 19% year-on-year growth in leasing finance in the business sector to £277 million, compared to a 10% drop for hire purchase to £246 million, in the same period. But that switch in funding methods has resulted in a relatively flat rate of growth in the overall business motor market, which rose just 3% to £523 million, compared to February 1995.

John Brown, chairman of the FLA's motor finance division, said: 'We fully expected demand for leasing would continue to rise. There has been a definite shift towards leasing away from hire purchase since the VAT changes took effect and this long-term trend has been borne out by the February figures.'

Meanwhile, demand for ex-fleet cars means the consumer motor finance market continues to be propped up by demand for used car finance. Demand for new car finance by consumers increased 5% year-on-year to £307 million while demand for used car finance increased 24% to £365 million.