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Strict new MoT could drive up non-prime borrowing

New MoT rules now in force could trigger a rise in loan applications from credit impaired borrowers, a major non-prime motor finance company has predicted.

The Funding Corporation, which has a retail arm with ACF Car Finance, says that thousands of people with problems accessing mainstream loans may now be forced to admit defeat on their ageing cars.

It believes many of the cars it takes in part exchange would not pass the new MoT requirements which were introduced at the end of March.

Items such as an unlit warning light on the dashboard, seats which don't move fully forwards or backwards, and doors which don't close properly are likely to result in an MoT fail.

The changes, which will bring Britain into line with the rest of the EU, reflect the increasing sophistication of modern cars.

But their impact will be felt most by people running older cars on a tight budget believes Mark Jones, senior manager of operations at ACF Car Finance.

He said: “We know that many of our customers put off replacing their car because of the difficulties they experience in getting a loan due to past repayment problems.

"Until now, they may have managed an extra year or two of ownership by scraping an MoT pass - but in many cases, this will no longer be possible.

"Many trade-ins we see display the type of defects which will now require an expensive repair to get them through the test, and this simply isn't an option for these owners.

"We will, as ever, try to be as flexible as possible to people put in this position, and not necessarily decline an application because of a blemished credit history.

"In many cases, past lapses don't result in an automatic decline if someone can demonstrate that they are able to afford realistic loan repayments.”

The Funding Corporation, formed just over ten years ago, provides finance for used cars supplied via its retail division, ACF Car Finance, which has seven showrooms.

Jones said his group welcomed the tougher testing regime which mirrored the stringent 136-point RAC-approved check to which the firm subjected all its vehicles before being put up for sale: "Cars built in the last decade have levels of technical sophistication far higher than those of 20 years ago when the MoT test last underwent a major revision.

"Within that time frame, however, we have also witnessed a continually intensifying squeeze on the availability of personal credit - which is the issue we address.”

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