Scotland Dealer Finance merger would radically alter the shape of
the UK point of sale finance market
Of all the major UK banks which could have combined their
operations, it seems somehow inevitable that the two which are,
circumstances permitting, to merge are the two with the largest
presence in the consumer point-of-sale motor finance market. Black
Horse Motor Finance and Bank of Scotland Dealer Finance (BoSDF)
have remained in the market while other banks have withdrawn,
despite toughening conditions, eroding margins and a perception
among banking theorists that running a motor finance arm is perhaps
not a core business area. The strong rivalry between the two
companies dates back many years.
Go deeper with GlobalData
Any merger of the two rivals’ operations – staff, systems, key
accounts, marketing, collections, and much more – will be a huge
and delicate process. According to figures provided to Leaseurope,
the Asset Finance division of Lloyds TSB, within which Black Horse
sits, had a new business volume of £3.7bn, of which Black Horse’s
share of new business is around 85 per cent, or £3.1bn, while Bank
of Scotland Dealer Finance had a new business volume of some
£3.2bn.
There is no doubt that marrying the forces of Black Horse and
BoSDF would create a motor finance player on a scale never seen
before – and there is considerable disquiet among dealers and
competitors about the might of a combined Lloyds/HBOS-backed motor
finance house. “It would dominate the market,” says one industry
observer. “Previously, dealers were able to negotiate better terms
with either Black Horse or BoSDF by playing one off against the
other. With that option gone, dealers will undoubtedly get a worse
deal, especially at a time when other funders are moving away from
point of sale motor finance.”
As with Lex and Autolease, the full implications of any possible
merger have yet to sink in, given the vast scale of any operation
to combine the two motor financiers’ businesses; what is clear is
that a revolution in the shape of the UK motor finance market is on
the cards. The existing relationships that Black Horse and BoSDF
have with dealers and intermediaries will have to be managed very
carefully to calm market jitters. Whether dealers are right to feel
apprehensive remains to be seen.
There will be dealers who will cut their ties with any merged
entity, thanks to a troubled history with one or other of the two
component companies. The question, then, is whether any other motor
lender could step into the gap, and expand market share. Santander
has been mentioned as a possible contender – if it has the appetite
to grow its current lending volumes. As one of the perceived
‘winners’ in the credit crunch – Spain’s restrictive rules on
banks’ capital ratios mean it is much better-capitalised than
rivals from other countries – Santander may see an opportunity for
its Consumer Finance division’s motor lending to grow. It may find
itself relatively unopposed. “Who else has the systems and the
backing to replace Black Horse or BoSDF?” the industry observer
asks. “It’s far from immediately obvious.”
How well do you really know your competitors?
Access the most comprehensive Company Profiles on the market, powered by GlobalData. Save hours of research. Gain competitive edge.
Thank you!
Your download email will arrive shortly
Not ready to buy yet? Download a free sample
We are confident about the unique quality of our Company Profiles. However, we want you to make the most beneficial decision for your business, so we offer a free sample that you can download by submitting the below form
By GlobalDataRecent history: Black Horse
In June 2008, Chris Sutton was appointed the new managing
director of Black Horse. He came straight from the post of managing
director of Lloyds TSB’s international banking division where he
was director of expatriate banking. This August, a company
spokesman told Motor Finance that: “Black Horse has achieved its H1
2008 objectives with special emphasis upon the success of its Rate
for Risk product.” Rate for Risk charges differing rates to
point-of-sale finance customers, based on their credit score (see
MF Aug 08).
In September 2008 Black Horse carried out a strategic review
aimed at controlling the administrative burden faced by its account
managers.
There was also a reduction in the number of account managers
employed and the number of area territories, with control being
centralised to North, Midlands and South regional sales offices.
Previously the majority of finance proposals were processed through
one of two volume processing centres in Edinburgh and Cardiff, with
a small percentage being dealt with by the 14 regional sales
support centres. These support centres now focused their attention
on debt collection activities.
Recent history: BoSDF
By 2006 BoSDF was writing the majority of deals on PCP which had
the added advantage of higher customer retention and repeat
business. In June of that year George Grant was appointed director
of the company. Previously he headed up Bank of Scotland Vehicle
Management, the bank’s motor leasing arm.
In 2007 BoSDF upgraded its online point-of-sale leasing portal
in order to reduce significantly the time taken when calculating
and approving lease proposals. It also took the opportunity to
re-brand from Capital Bank – a company whose provenance went back
to the very eminent North West Securities, based in Chester.
Early this year the company re-structured its senior management
with Paul McGill appointed head of distribution, Simon Cotton head
of products, and Peter Cottle head of strategic accounts. By June
the company was facing the credit crunch with a decision to divest
itself of any broker business with a spokesman saying: “It is
simply a matter of prudence”.
