Motor finance lenders are optimistic about the future availability of funds for car loans, but they remain cautious as the Government prepares to review all forms of lending for business.
Latest data from the Finance & Leasing Association reveals a year-on-year penetration increase in showroom loans for new cars (see story, below).
Paul Harrison, FLA head of motor finance, said: “Our statistics show that the motor finance market for consumers and businesses has performed very well in 2010.”
Britain’s leading high-street banks, who all advance cash for car loans, have announced higher profits. They include Lloyds Finance Group (Black Horse is a division) and Royal Bank of Scotland which both received extensive aid funded by taxpayers during the 2008 financial crisis.
The banks are coming under Government and Bank of England pressure to advance more loans to small and medium businesses, causing some concern that motor loans could be squeezed.
Harrison said: “Banks, like all lending institutions, will look to get the best possible return on their investment. They will seek out a diverse portfolio of loans to help reduce their risk in the event that any specific markets weaken.
“The automotive industry will be one of many industries supported by the banks and we have had no indication this is under review.”
He said the availability and price of wholesale funding was changing from day to day.
The appetite of the banks to lend was slowly improving, although the cost of funds remained higher than finance companies were used to.
“The FLA welcomes the Government’s Green Paper on business finance to further improve market conditions and help address any future failures,” said Harrison.
Dealer loans up in year to June
Point-of-sale retail advances for new cars increased by half a percentage point to 46.4% of the total in the 12 months to June compared with the corresponding penetration in May.
The Finance & Leasing Association believes the upward trend is due to the end of the scrappage scheme – the £1,000 Government bonus reduced the proportion of dealer loans.
In June advances on new car loans through dealers totalled £587 million, which was 22% up year-on-year.
There was a 5% increase to £514m on loans for used cars, says the FLA.
Total showroom loans for new cars during the year to June were 25% higher at £6.52 billion, and the second quarter total of £1.561bn was 21% better.
The total of 373,329 new cars bought on finance by businesses was 4% higher year-on-year in the 12 months to June.