Prime and subprime car finance provider
Moneyway is currently piloting its settlement short fall loan
scheme with dealerships, providing a loan to cover the negative
equity in a car finance deal.
David Nield, director of lending at Moneyway
parent Secure Trust Bank said the scheme would come in to play when
finance companies could not offer a customer the full amount
required because of loan-to-value restrictions.
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Nield said that dealers were often frustrated
by declines on finance proposals forfeiting sales, particularly
when “terms on acceptance don’t allow them to do the deal on the
customer.
“That’s most common on loan-to-value and is
quite often from the previous finance deal the customer was in, so
they’ve got negative equity.”
Do your deal
Nield explained that many ideal agreements
were being lost in dealerships owing to loan-to-value terms on
prime agreements, and said that the scheme would be able to step in
to make another deal possible as a best alternative.
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By GlobalData“What we’re saying is: ‘Do your deal with your
prime finance provider,’ so that’s a smaller balance and
payment.
“Then take a settlement short fall loan to
cover the negative equity.”
The loan is designed for true prime customers
facing negative equity on a part-exchange deal, available over 12,
18, 24 or 30 months on sums between £500 and £4,000.
The scheme operates with zero deposit and zero
interest rate, with the subsidy deducted from dealer
settlements.
Half the time
With car financers and dealers
obligated by Treating Customers Fairly regulation, Nield also
emphasised the ability of the loan to aid consumers.
“What we don’t want to do is burden the
customer with long-term debt. We’d like to help the customer get
out of the situation when they change the car.”
Andy McMorine, head of lending development at
Moneyway, said a large part of this was down to the relative short
lengths offered by the pilot scheme.
“We’ve termed our proposition at half of the
period of the prime loan.
“On a 60-month deal – which most of these
deals will be – we’ll lend the interest-free element to top up over
30 months because we know some of our competition out there will
offer top-up loans at 48-month terms, which doesn’t really put the
customer in a better position.
“The shorter you can put that cycle in on the
top-up loan, the more beneficial for the customer and also, more
importantly, the less total interest the customer will pay across
both agreements.”
An extended analysis of the pilot scheme
will be published in
April’s issue of
Motor Finance
magazine.
richard.brown@vrlfinancialnews.com
