Shoppers ‘buy-now-pay-later’ to beat recession.

With credit more difficult to secure than pre-crunch, consumers are turning to in-store credit to help fund purchases, according to the latest figures from the Finance and Leasing Association (FLA).

In-store credit is commonly used to pay for items such as household electrical goods and soft furnishings and typically requires shoppers to pay the sum back over a period of months, over which time they accrue interest. In some cases, however, interest free credit is offered.

According to the report, in-store credit is up 24% on the same month in 2008 to £230 million. Year on year, the proportion of credit made up by in-store credit purchases has grown 9% in the year ending in March.

The FLA report also revealed a 12% reduction in overall new consumer lending in March 2009 compared with the same month last year. The total new lending figure for the year ending in March was £58 billion, down 13% on the year to March 2008.

With the credit crunch still making it hard for mortgage lenders to access wholesale funds, secured loans fell by 76% in March compared with March 2008, while new credit card business was down just 3%.

Geraldine Kilkelly, Head of Research and Chief Economist at the FLA, said:

“Overall, consumer finance is still being hit by the downturn. With a depressed housing market many people are choosing to improve their homes and replace furnishings rather than move house. Retailers and lenders have been offering attractive interest-free credit and deferred payment deals on store instalment credit.

“We have seen a similar trend in recent months in the motor market. The proportion of car sales represented by instalment-type credit available in the dealerships has grown from 48% to 54% over the last year. This is mainly a response to competitive pricing and reduced availability of other sources of credit.”

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