The Finance and Leasing Association’s (FLA) head of motor finance has said that every effort should be made to keep motorists “in their cars” as coronavirus inhibits some consumers’ ability to make repayments.
In a call with AM today (March 20) Adrian Dally said that, while there exist significant differences between car finance and mortgage repayments, efforts must be made to ensure that motorists do not lose their mobility due to short-term financial difficulties triggered by the COVID-19 coronavirus outbreak.
Government has urged mortgage providers to offer three-month repayment 'holidays' available to home owners in light ofthe financial strain placed on many households by the coronavirus outbreak.
While Dally said that the difference between a payment holiday on a 25-year mortgage, on a property which will go up in value, and a three-year finance agreement on a depreciating vehicle were marked, but said the sector must do what it could to help consumers.
After describing finance as “the petrol in the engine of the economy”, Dally said: “How we support our customers now is really critical.
“We are having conversations with all the relevant authorities to determine exactly what that support looks like. It’s clear that many customers will require support to help bridge them through this period.
“In a nutshell, in the motor finance sector, what it means is keeping customers in their cars is what’s needed.”
Used car website DesperateSeller.co.uk reported an 18% increase in searches for cars priced under £2,000 since last week, when the coronavirus crisis escalated – with London the hotspot for the trend.
While the online retailer put this down to consumers desire to step away from public transport in a bid to avoid personal contact, it could also be attributed to some motorists’ exploration of cheaper alternatives to PCP or PCH deals as they consider the current situation’s impact on their finances.
In the US, Ford has introduced a three-month payment deferral for its new-car customers, plus three more paid by Ford, for up to six months of payment peace of mind during the coronavirus outbreak.
It remains unclear what impact the coronavirus will have on motor finance default rates here in the UK, but Dally suggested that the support had to be there to maintain consumer’s faith in their finance provider and the product they have chosen.
"The risk of people losing their cars is not a new one but the context in which this is happening now is clearly very different,” he said.
“The people who have been highly credit worthy until now and will be highly credit worthy in the future.”