The percentage of people choosing finance through a dealer rose from 45.8 per cent in 2009 to 52.1 per cent in 2010, according to the latest figures.
This equated to over half a million people in 2010 in sales totalling over £6.4 billion. The increase has been attributed to the large number of competitive deals on offer for buyers.
A drop in demand for new cars in the wake of the scrappage scheme coupled with the prospective VAT rise to 20 per cent in 2011 meant dealers were more likely to offer discounts to remain competitive and sell cars. This in turn increased the amount of people using deal finance.
However, Paul Harrision, Head of Motor Finance, said: "While dealers had a good year in 2010, they are cautious about the future."
He pointed towards a decline in consumer confidence which saw the number of people using dealer finance decrease towards the end of the year. In December, there was a fall in the number of cars bought using dealer finance, which could continue into 2011.
Dealer finance involves essentially taking a loan out from the dealer, often meaning larger amounts can be taken out than a personal loan.
The finance is then paid back on a monthly basis until the car is paid off. Dealer finance options are often popular because of the low deposits needed and choice of contract lengths and other extras such as vehicle replacement cover.
Dealerships such as Perrys offer a range of dealer finance options for new cars with a range of contract lengths and low deposits. For more information on financing your car, click here.