Just when it seemed
there would be a pleasantly optimistic start to this letter, a
report from Begbies Traynor landed on the Motor Finance
desk, claiming that the UK automotive sector has slipped back into
decline.
According to the report, 3,352
companies were found to be in distress in the last three months,
compared to 3,007 in quarter two.
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New car registrations for September
tell the same story – down 8.9 on last year, and capping a grim
quarter after August’s 17.5 percent interannual slump.
Needless to say, scrappage –
specifically the withdrawal of it – is the term that keeps coming
up in explanations of the figures.
As such, the FLA’s finance sales
statistics for August
(2 percent down overall year-on-year) are better news than they
might seem. Such an outperformance of general retail would seem to
support the claim finance companies have repeatedly made – that
scrappage never did as many favours for funders as it did for
dealers.
But this may all be academic in
comparison to the changes that lie just around the corner.
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By GlobalDataBy the time you read this, the results
of the government’s spending review will have come to light, and
with them a better indication of just how far we can all expect
consumer confidence and spending power to fall.
Anxiety is already palpable, and has
by all estimations already contributed to a rapid dampening of the
optimistic mood that permeated the industry during the summer
months.
The pre-VAT increase bounty that many
assumed would drag sales up in the final quarter seems less and
less likely to materialise, and many finance providers are
seriously starting to wonder where their volumes are going to come
from over the next few months.
Much as the Met Office is predicting
the second seriously icy winter in a row, funders seem to be
looking at another dip into a chilly sales climate.
But enough pessimism – where are the
opportunities?
There seems likely to be a little more
action going on in the used car sector. While August’s stats show a
decline in new car finance in August, used car finance volumes were
slightly up, a situation that those in the know say will continue
to develop for the rest of the year.
A lot of this movement looks set to
come from captive finance providers, who will be looking to finance
pre-owned vehicles as a good second best to funding new ones, which
in the case of many popular models seem to be in chronic short
supply.
Better to take a worse margin on a car
on a forecourt now, it would seem, than wait until spring to sign a
slightly better deal, for a customer who may have lost interest in
the meantime.
This kind of opportunism is going to
serve the industry well, as is a constructive approach to the
incoming barrage of new regulation.
One must commend the positive thinking
of those organisations who see the looming CCD as a way to boost
consumers’ faith in the motor finance sector – it goes to show that
a decent business can see an opportunity in any new
circumstances.
For others, it just represents more
potential legal hassle, a lengthier and more costly sales process,
and the possibility of a culture emerging where consumers find it
perfectly acceptable to slip out of new finance agreements with no
explanation.
At least plenty of help is at hand –
the FLA’s SAF scheme is going from strength to strength, and the
Motor Finance inbox is flush with useful legal
commentary.
One more note on opportunity. This
month, Motor Finance spoke with the managing director of
an extremely switched-on independent lender, who looked to be in
the final stages of acquiring a significant pot of funding for his
business.
If all goes to plan, it should be a
much-welcome growth story, and one that could revitalise wholesale
funders’ interests in more challenging sections of the market.
After all, the profits are there to be taken – just look at what
S&U subsidiary Advantage took home in its latest results.
Then again, it’s hardly profound to
point out that a little more capital in the motor finance business
would ease a lot of the problems mentioned above.
Let’s just hope that when things
finally look to be on the up for good (and there is certainly no
way to put a date on that), the companies that have made it through
the present era stick to the achievements they will have made in
building up efficiency, process and service provision.
Here’s to a busy fourth quarter.
Fred Crawley
fred.crawley@vrlfinancialnews.com
