Advantage Finance was founded in 1999 by compliance director Keith Charlton and managing director Guy Thompson, under the umbrella of parent company S&U, the home credit supplier.
Although S&U supports and funds Advantage, with which it also shares some technology and synergy, the two companies operate independently in separate markets.
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According to the company’s first-half results for the fiscal year, published in August 2012, lending at Advantage was up to 3,000 contracts, from the 2,500 contracts written in the same period of 2011, itself up from the estimated 2,300 contracts written between February and August 2010, with a rise in average contract value from £4,500 to £5,000.
Such a gradient in growth earned Advantage praise from S&U for its "outstanding progress" and work model which recorded transactions, revenues and collections as all above budget, accompanied by record employee productivity, and achieved while impairments fell.
While any lender may be satisfied by this commendation, and any parent satisfied by this performance, Advantage has achieved in a subprime market apparently guided by guesswork and apprehension.
Since 2008, consultants have spoken of the stratification of lenders in the market, some providers have left the market, some have seen individuals banned from it, others have remodelled themselves along staff or product lines, and all while a handful have seen approval rates rise.
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By GlobalDataAdvantage is one of those and Charlton, Thompson and sales director Jim Murdoch, are determined to see their book continue to thicken.
Jared Fortune: What’s the market and business been like for Advantage Finance since the start of 2011? What’s it been like for subprime lenders in general?
Jim Murdoch: For ourselves, 2011 has been a fantastic year and H1 2012 has been fantastic. We’ve had overall growth of business written, we’ve diversified the products we actually use in the marketplace. Service
levels without a doubt have always been good, but I think that we’re getting closer to the individual brokers.
For the rest of the industry, I think there have been some major changes the industry has had to make in order to maintain their market share. The credit crunch has set the cat amongst the pigeons really.
JF: Where has that success come from?
JM: We had a strategy that was very much focussed on partnership values.
JF: The past two years have seen steady growth for Advantage, how has the strategy contributed to that?
JM: We’ve most definitely stuck to where we believed the growth in the marketplace would be, and where our partners were, predominantly car finance brokers.
Many of our competitors dip in and out of the broker marketplace, but we’ve firmly built our volumes around core supporting brokers and we deal with most of the market’s key brokers.We’ve probably got the same core introducers as we had six years ago.
We picked our partners well, let’s say. They’re still here and they’re still producing numbers for us. Our strategy was to go down the broker route.
Consistency of our market position is of paramount importance to a broker.
JF: What do you think 2011-2012 has been like for the subprime market?
JM: Competitors are not something we really worry about. We do what is right for our company and our introducer.
For certain companies there could be areas of struggle, but I don’t know. We don’t concentrate on where their marketplace is or what they’re doing. We concentrate on what we’re good at.
JF: Despite the good growth, what sorts of challenges have you faced this year?
JM: If there’s a challenge out there, it’s understanding what the marketplace may need in the future. It’s about consistently changing – making little changes, not massive fundamental directional change, but making little changes to products, revision.
We have a new product – it’s our platinum product – which is not a wholesale change. It’s still underwritten in the same way. It just fits into certain marketplaces a little better which enables brokers to have a wider area of business they can write with Advantage.
JF: Currently, you just offer hire purchase, why the emphasis on HP?
Guy Thompson: When we started, that was our background. We’d all been in motor finance in previous lives and it’s what we were familiar with. It was a natural thing for us to do and, over the last 13-14 years, it has stood the test of time.
HP gives us security on the vehicle. It increases the desire of the customer to pay, because there is a level of title for us in terms of the risk, for both of us, really. We’ve never really felt that we need to stray away from that. It worked.
Keith Charlton: I would go further. There are other potential finance products available for car purchase but throughout the whole time we’ve been in business, and before, we’ve believed that HP has provided the best all-round balance of obligations and rights for both parties.
Despite some of the products’ potential drawbacks it’s a product that we’ve grown up with and we understand the risks.
One of the keys to our success has been the ability to analyse the risks we undertake, and that’s all been based on the HP product.
JF: Do you think PCP will ever have scope in subprime?
GT: There is definitely scope for a PCP-type product, one of the things Jim alluded to is: ‘What lies ahead in the market?’
We’re already looking at the possibility of a PCP-type product and the main reason behind that is, we don’t particularly like long-term credit, 60 months for example, which a lot of people do. It distresses the market and it elongates the buying cycle for the customer. So some form of PCP-type product, sensibly done at the top end of our spectrum, we’d probably be very interested in taking a look at. We’re not ruling that out at all. Far from it.
JF: Do you expect to see business continue to grow at the same pace as H1 2012?
GT: We’re expecting to achieve our targets. Our targets are always set at the beginning of the financial year, which is February. Our objective is always, before we set the target, to analyse the market, our resources, etc, and set challenging targets that are achievable. That also allow us to grow and develop the business. And the same will happen next year and hopefully the year after. It’s an interactive process.
JF: And there haven’t been any freak financial accidents, given the economic climate, to make you suspect a negative influence on potential growth?
JM: No, I don’t see anything in the industry that would hold us back on any future growth plans. Absolutely not. To the contrary, I think our relationships are growing stronger with our introducers.
JF: What does the rest of 2012 hold for the company? Any challenges?
JM: If we carry on doing what we are doing then things will still be very positive. We’re always open to change, little change, little things. ‘Little and often,’ we say and I think that’s what brings us success and listening to our introducers and to our customers, as well.
GT: We’re always looking around the market. We’re always looking at what’s going on around us, the influences of competitors, global influences such as recession, etc. Obviously, we keep ourselves availed of what’s going on around us. There are no specific challenges that I suppose any of us feel would prevent us from achieving our objectives this year.
