Demand for subprime lending has more than doubled in the last year, according to motor finance broker Caerus Capital.
It says the coronavirus pandemic has driven a 112% uplift in demand for subprime car finance, as more households suffer reduced credit scores.
Ben Maguire (pictured), commercial director of Caerus Capital, said: “The pandemic has caused financial hardship for many families and young professionals who have been furloughed or made redundant over the last 12 months. Recent figures from the Financial Conduct Authority estimate that nearly a third of adults have seen their incomes impacted by the coronavirus pandemic.
“As a result of this financial toll, many ‘prime’ consumers prior to the pandemic, now find themselves with sub-prime credit scores. We have experienced a steady increase in car finance applications for sub-prime and guarantor loans, with the average vehicle purchase price sitting at £7,246.
“Our data also shows that there is strong regional divide, with the highest number of sub-prime applications coming from the Birmingham and the East Midlands regions.
“We are working hard with dealers to convert declines into accepts and we are currently converting declined applications to accepts at 79%.”
The number of new sub-prime borrowers taking out credit cards increased by 143% between August and September last year, according to analysis from the credit reference agency Equifax, more than twice the increase in borrowers taking out cards overall.
Figures from HM Revenue & Customs, for January 2021, showed that there were 726,000 fewer people on company payrolls compared with February 2020, before the pandemic.
With much of the economy still in enforced hibernation, the unemployment rate in the three months to December increased from 5% in November and was up by 1.5% from a year earlier, according to the Office for National Statistics.
Furthermore, it is estimated that one million self-employed people are also understood to be without work, many of them not eligible for state support.