Q: There is currently
an undeniable imbalance between supply and demand in non-prime and
subprime finance. What view does the FLA have of this
situation?
PH: Supply of
wholesale finance to non-prime lenders has been a concern and
reflects the commercial banks reining in the amount of funding that
is available because of the downturn, as well the perceived risk
some banks have attached to investing in the motor sector – which
we strongly believe is unfounded.
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We continue to speak to the government
– as well as the Bank of England – about funding support for all
specialist motor lenders, and our work has led to discussions in
Brussels about the potential introduction of a government guarantee
scheme to help lenders’ liquidity.
Q: With subprime motor
finance far less freely available than in the past, where are
customers who fall into this category turning instead for car
loans?
PH: I can only
comment on FLA figures and so have nothing to add here other than
we clearly do not want to see customers turn to unregulated
consumer credit providers.
Q: Are there any general
trends in arrears levels for non-prime motor finance players that
you can point to?
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By GlobalDataPH: Total FLA member
motor finance arrears have remained remarkably stable throughout
the downturn, which reflects lenders’ robust background/credit
checks and tight underwriting. There has been no significantly
increase in arrears levels. With credit less readily available
elsewhere customers are more likely to honour their existing
arrangements.
Q: There has been much
talk of new entrants to subprime/non-prime motor finance: what are
your views on this?
PH: The recession has
lead to subprime providers either leaving the market altogether or
purposefully being more selective on deals, perhaps because of more
limited funding. As you point out, there is certainly a lack of
supply.
However, it is only a matter of time
before a new or existing lender looks to enter this space. I would
expect this to be a gradual process with far more scrutiny over
deals – quality is more important than volume.
