HP and PCP providers look set to face stiffer
competition from direct loan providers in the second half of this
year, as the high street begins its return to the car finance
market.
FLA members are monitoring the rates of
unsecured lenders, and are predicting stronger competition from
consumer loan providers in the near future.
Go deeper with GlobalData
Competitive pressure from direct lenders
dropped massively in the wake of the credit crunch, leaving an
opportunity for point of sale finance providers to achieve greater
penetration into UK car sales.
Things may be changing, however, with personal
finance providers such as Sainsbury’s Finance (headline APR 6.8%,
applying to loans of £8,500 over 4 years, with a homeowner
applicant) leading the charge.
Steven Baillie, head of personal loans at
Sainsbury’s Finance said: “Our latest car-buying index, looking at
peoples’ current car purchase plans between March and September,
suggests that 19% of people planning to buy a new or used car over
the next six months will look to finance at least part of their
purchase with a loan.
“Of the total amount that will be spent, the
research suggests around 12% – equivalent to £6.2 billion – will be
financed by personal loans. This figure is up by £400 million
on six months ago.”
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By GlobalData“We offer a range of loans which we sell
online and over the phone. We expect competition to increase during
these challenging economic times as people look for the very best
way to finance their cars. We are committed to offering our
customers competitive rates and offers that will appeal to
them.”
However, Sainsbury’s robust stance is
countered by that of the AA, which provides direct loans on behalf
of the Co-operative Bank.
Spokesman Ian Crowder said: “We don’t have any
immediate plans to compete with the existing providers of motor
finance. Our loans are reasonable value; we’re not the most
competitive and neither are we the least. Our focus is on
concentrating on our savings and credit card products.”
A wider examination of attitudes to motor
lending in the direct loans market will appear in June’s edition
of Motor Finance.
