Car buyers will demand greater flexibility from their car finance agreements in the event of a hard Brexit, according to Startline Motor Finance.
There is a strong chance that leaving the EU could affect the motor finance sector “substantially” as the risk of recession and failing consumer confidence deals a blow to car buyers spending plans, according to Paul Burgess, chief executive of the finance specialist.
Burgess said that “almost no economic experts see a positive effect in the short-medium term”, adding: “It is not a political comment to say that even the best hard Brexit outcome would be bad for the economy and the worst could be very damaging
“This is likely to influence all aspects of the used car market and motor finance will not be unaffected.
“Given historical precedents, underwriting rules are likely to be tightened just at the point in time when used car retailers really need some additional flexibility.
“That is why we believe that the kind of flexible lending that we provide could prove to be an essential part of any dealer lending panel over the coming year and beyond.
“Because our whole approach is based on a form of underwriting that is more holistic in approach, we will often be able to help when traditional motor finance providers cannot.”
The Society of Motor Manufacturers and Traders (SMMT) 2019 UK Automotive Trade Report recently revealed the stark findings of its research into the impact of a no deal Brexit on car manufacturer operations.
It calculated that delays to production caused by friction at the border could add up to £50,000 a minute for the sector.
The SMMT said that the end to borderless trade could bring crippling disruptions to the industry’s just-in-time operating model – amounting to losses of up to £70 million a day in the worst case scenario.
Jaguar Land Rover (JLR) chief executive Ralph Speth had previously warned the Government that a ‘no deal’ Brexit would cost it £1.2bn a year – putting thousands of UK jobs at risk.
Burgess said that car retailers could suffer from rising unemployment and finance defaults if the economy starts to falter due to a hard Brexit scenario.
“Used car buyer credit scores which is something that we saw after the financial crisis,” he said.
“There will undoubtedly be a demand for motor finance from people who have encountered these problems and more flexible motor finance is the only solution without turning to the high rates and tough conditions of sub-prime lenders.”