The company, which linked selling cars and loans to customers with poor credit records, was the fifth departure from the industry last year, with an expected loss of £24m.
And David Titmus, director of Approved Car Finance, predicts: “There is likely to be further contraction. I would not be surprised to see another casualty in the first quarter of 2006.” But Titmus is adamant that sub-prime can be made to work. “Ours is a successful, profitable operation,” he says. “More than 800 people losing their jobs is bad news but we will capitalise on the situation.”
Titmus, marketing director and a founder of ACF’s parent company, The Funding Corporation, does not rule out picking up some strategic Yes Car Credit outlets to supplement his operation’s eight sites.
He claims the market was not big enough for YCC’s 27 branches, particularly when retailer groups run small sub-prime operations as virtual clearing houses. YCC’s problems, he says, included a finite, small market, where there is a little bit of sub-prime everywhere. “That’s why they spent so much on marketing to reach a limited audience,” he adds.
Titmus points to TFC having slimmed down ACF’s operation, particularly in terms of cost effective marketing, after taking it over from receivers two years ago.
“We keep overheads down, spend carefully and manage scientifically. We propose business to TFC, and it is down to their managers and underwriters,” says Titmus.
“It is not just about moving metal. It must be a good, solid underwriting proposition.” Preparation of stock, says the ACF executive, is paramount, and he reasons: “People who are in employment tend to pay their loans, and vice versa.”
One veteran sub-prime commentator blames contraction on the finance sector having to deal with an increase in “cannot, will not pay punters” while brokerages and finance companies offer to roll all bad debts up into mortgages.
“Most finance majors have run away and franchised dealers in general don’t want to know,” he comments.
YCC’s demise was accelerated by a scathing expose on the BBC Whistleblower TV programme, which highlighted selling techniques and the quality of cars.
Other sub-prime closures were Finax, a Bank of Scotland subsidiary, GE Money’s GE Custom operation, Park Asset Finance and Britannia Credit.