Motor Finance’s consultant editor Brian Rogerson is not
the alarmist kind, so when he mentions that the gathering clouds of
the credit crisis may spark a recession, it’s worth taking notice.
Brian has been keeping a weather eye on the London Interbank
Offered Rate (LIBOR), the benchmark index of London Interbank
lending, calculated daily from the rates at which banks agree to
lend each other money. He says: “As fallout from the credit
derivatives crisis, LIBOR has risen to some 115 basis points – 6.9
per cent – above the Bank of
England base rate which is currently 5.75 per cent. This is the
highest rate differential from the BoE rate since November 1998 –
the first signs of the last recession.”
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Lessors and other lenders use LIBOR to determine their margins, so
any rise is bound to have repercussions. What impact will the rise
in LIBOR have on your business?
The credit crunch is also having its effect on the retail motor
sector too. As debt counselling requests rise 20 per cent at
Citizens Advice, consumers are increasingly under pressure, says
Miles Roberts of Southern Finance. He advocates ever-finer tuned
credit scoring systems: “I believe a more flexible credit
assessment – where the agreement and the buyer are assessed on
their own merits – is a much fairer way of assigning credit,”
adding that having a better idea of a customer’s credit position
leads to more responsible lending, and avoids the storing up of
future problems. This is a theme examined in this issue by John
Flint, who gives a comprehensive overview of the new onus on
lenders to treat customers fairly – see p20 for more.
Our cover story this month looks at the point-of-sale insurance
sector, another area affected by the new strictness governing
customer interaction (p14). John Osborne finds that sellers of
payment protection insurance should look to the future, as changing
market conditions could offer a glimmer of hope to the beleaguered
sector, while dealers are ever-more aware of the importance of
selling finance and insurance along with the car. For those
concerned about legislation and public reputation, the launch of
the FLA’s new Competence Test is a positive move that should see
standards rise across the industry – see p6.
Finally, the government is to channel up to £270m of public sector
car lease contracts through the NHS Purchasing and Supply Agency
over the next three years – and ten lucky fleets are to supply the
vehicles in question, up to 100,000 of them. To find out which
lessors made the list, turn to p9 for our in-depth report on the
new “Pan Government Collaborative Framework Agreement”. It’s not
the most eye-catching of names, but its potential effect on the
industry is enormous.
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