That is the prediction from David Burton, managing director of Performance Bonus Limited, an automotive and financial services consultancy, who believes direct lenders are also discovering that increasing numbers of consumers will not or cannot honour finance agreements.
He says: “Motor finance has also not quite proved to be the road to riches process that operators like the supermarkets and direct lenders believed.
“It is one thing advertising low interest rates and being flooded by applications but another when they find out that many of their customers had no intention of paying back the money. The big guys with the very big loan books are sitting on an awful lot of bad debts.”
As a result, Burton claims the tough market place is generating a vacuum as larger players tighten up on their score card credit-rating system.
And he predicts: “There will be two types of beneficiaries.
The not so large, not so small independents like Carlyle, Close and Southern, who are agile and flexible – and those that are foreign, particularly Continental banking groups, who see potentially attractive yields in the UK and want a slice of the relatively high interest cake.”
Burton points to un-named major lending institutions, which have grown with consolidation within the sector, which in turn creates a ‘black hole’ with a vast operational scale that compounds bad debt figures and means they become “more and more driven by processes and corporate policies”.
As a result, Burton argues that this protective approach drives retailers into the position of seeking “wider relationships and more open conversations on the lending front with other people, including the mid-sized independents, who are pickier about the business they do, but more flexible in the way they do it.”
Equally, he maintains that overseas banking groups, including those with insurance specialities, are watching the market closely and lack the “bad debt baggage”.
Burton, whose company has carried out exhaustive research on showroom traffic, sees point of sale showroom finance selling as an enduring feature, but one that requires better and a larger number of skilled practitioners in dealerships.