Two out of three dealers believe near-prime finance will become more important to their businesses if there is a recession in 2020, according to research from Startline Motor Finance.

The research also shows 54.6% expect prime lenders to reject an increasing number of applications in 2020 following a trend they have seen in the last 12 months.

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Paul Burgess, CEO at Startline Motor Finance, said: “I recently read a view of 2020 that said, even if it isn’t technically a recession, it’ll feel like one. There is little question it is going to be economically challenging. To some extent, the used car market is a counter cyclical business and tends to do quite well in these conditions but it can only do so with the support of motor finance companies. This is what will make next year so interesting in our sector.”

“Our research shows that dealers already perceive prime lenders as reducing their risk appetites and that this will continue into 2020. In these circumstances, there is a good chance that near-prime lending will come into its own as an attractive alternative,” he added.

The research also showed 29.8% of dealers already have a near-prime option on their lending panel with 80.7% seeing near-prime as important to their business.

Burgess said: “It is interesting to see the speed with which near prime lending has established itself in the UK used car market and the value that dealers already place upon it. Given market conditions, it is reasonable to expect penetration to increase next year.”

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89.3% of dealers said it is important for near prime lenders to have a range of products rather than HP.

“We are seeing the truth of this in our own product range. Startline offers what we believe to be the only near-prime PCP product on the market and this is a product that is proving very successful for several dealers, given both the popularity of PCP in the used car sector and the growing requirement for near-prime lending,” Burgess concluded.

The research conducted by Startline reported and surveyed 57 dealer businesses including franchise groups, independents, car supermarkets and online specialist brokers.