Dealers and finance providers have “a real opportunity” to promote point-of-sale (POS) business despite consumer worries created by last month’s unprecedented week of turmoil in the sector.
Stephen Sklaroff, Finance and Leasing Association director general, said POS rose to 50.7% in July, a further increase over the 50% achieved in June.
“Our statistics show a steady rise this year in new car finance penetration, and there is cause for optimism,” he said. “The value of finance provided for new and used cars was up 5% and 3% respectively in the 12 months to July.
“Finance for business cars is also holding up well – the volume for businesses dipped by a modest 1% in the year to July, while that for used cars increased 1%.”
Sklaroff said the opportunities for dealers arose because market dynamics have changed over the past 18 months.
“As lending criteria have tightened, more consumers are turning to POS as a flexible way of funding their vehicle purchases,” he said.
“Secured finance providers are naturally aware of market conditions but are lending at higher levels than a year ago.”
Asked whether FLA members were able to find the funds to providing loans via dealers, Sklaroff said: “Funding arrangements differ from company to company and between captive and independent providers.
Cost of funding
"The cost of funding has certainly increased but the competitive nature of the industry means providers are highly efficient and cost-effective.”
Though the motor finance sector was in good shape, companies were expecting tight trading conditions for the rest of the year and into 2009.
“The SMMT’s forecasts for new car registrations underline this view and have been reduced to 2.26 million units, and 2.16 million in 2009,” the director general said.
He said the level of arrears on existing finance agreements had increased slightly over the past year, as was expected in the current climate.
Fraud was also a concern for lenders, as consumers found it more difficult to access credit: “The FLA is keeping a close eye on the trends.”