The lender anticipates
growth following major refinancing deal. Fred Crawley
reports.
Go deeper with GlobalData
Big things are about to
happen at Duncton Plc.
In the converted railway
station where the lender’s new business is processed, upstairs from
an office where staff are taking a stream of calls from brokers,
several darkened rooms are stacked full of new desks, chairs,
telephones and computers.
Before long, it seems, the
lights will be coming on – the company is waiting for the ink to
dry on a major refinancing deal which should see it boost lending
substantially.
After 18 years of maintaining
a relatively low profile in non-prime motor finance, the same
factors that checked Duncton’s growth in an overheated market seem
now to have left it perfectly placed for expansion.
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By GlobalDataAccording to managing
director Peter Minter, the reason Duncton is still standing despite
the demise of the sector’s larger funders is deceptively
simple.
“We are an asset finance
business and, as such, I believe we are unique in this industry,”
Minter says.
He is referring to the
company’s insistence – once considered unusual – on never financing
more than the trade value of a vehicle, and keeping a
near-obsessively close eye on car values.
Cast-iron
security
This policy saw
Duncton struggling to achieve the same volume growth as competitors
in the boom years of the mid-noughties, when many lenders would
lend against 120 or even 130 percent of car values.
However, it also left the
business with cast-iron security in its asset base, even through
the difficult times of 2008.
While the going was certainly
tough throughout recession, consistent returns from vehicle
disposals kept Duncton solidly above water.
Now, it has found itself
virtually alone in the non-prime field.
While, by many estimates, the
market saw an annual throughflow of up to £3 billion at its peak,
supply of finance to anything but the top tier of car-buying
consumers may now be as low as £100million-£200 million.
Duncton is currently
understood to write business in the double-digit millions each year
and holds a customer book of 3,500. But the company is also deeply
engaged in a search for additional funds that, Minter hopes, “will
go a significant way towards filling the gap left by withdrawals in
the sector”.
The case for investment is
good – not only are margins across the whole sector better than
they have been for some time, but customer behaviour has changed
markedly, in Duncton’s experience. With finance so much harder to
acquire, says Minter, consumers have become much more conscientious
and determined in their efforts to make payments promptly and in
full.
This trend has married well
to an increased focus on customer contact across the business,
explains head of commercial development Shamus Hodgson.
“Traditionally, it has often
been the case that finance companies – especially those operating
through brokers – have chosen to remain anonymous until the
customer has gotten into severe difficulty,” says
Hodgson.
“We are trying to re-engineer
this, to give us a relationship with the customer from day
one.”
In practice, this means
customers are given Duncton’s details in its ‘welcome pack’, and
encouraged to contact the company should they get into financial
trouble.
In addition, Hodgson has
overhauled Duncton’s correspondence design to make the company
appear more approachable.
In addition to these and
other recent tweaks to Duncton’s customer-facing activities,
significant investments have been made to the company’s IT systems
and processes.
Chief among these is its
system for taking proposals through brokers, a heavily customised
build of software provider Equifax’s InterConnect system. Much
effort has been made to make Duncton ‘user-friendly’ to its
customers, so pains have been taken to make the system practical
for brokers.
However, Minter says: “The
simpler a system looks, the more time it generally takes to
make.”
It is certainly simple enough
to use. After pulling together a page of customer information
entered by a broker, the Equifax system can deliver separate
quotations within 10 seconds based on a customer’s placement within
the general non-prime market.
The system delivers an
effective, if stripped-down, ‘rate for risk’ proposition, and
Hodgson is confident its speed will give Duncton an edge in terms
of its offering to brokers.
It is also very scalable,
being designed to transact many more proposals than the company is
currently seeing.
More
business-processing staff
In fact, the IT processes
currently in place throughout Duncton are capable of taking on any
extra business further funding would enable, says Minter, meaning
expansion would be made mainly through the acquisition of more new
business-processing staff.
While the company is
committed to maintaining its presence in the lower tiers of the
non-prime sector, it is planning to direct business growth towards
the type of consumers lying just outside the criteria of prime
funders.
The reason for this is
expedient – while subprime business can take up to two weeks to
process, due to the complicated checks and analysis involved in
mitigating risk, non-prime and near-prime proposals can often be
turned around in a day.
Although nothing can be said for sure about the company’s
future while the search for funding continues, the energy that has
gone into preparing for a new scale of operation over the past year
leaves one thinking large-scale growth for Duncton is surely a
question of when, rather than if.
