ACF Car Finance and parent lender The Funding Corporation have warned stricter MOT regulations could see more consumers having to ditch old cars, thus pushing up demand for subprime lending.
Non-prime finance provider The Funding Corporation said at present many of the cars it takes in part exchange would not pass the tightened rules of the MOT begun in March to bring the UK in line with EU standards for cars.
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Mark Jones, senior manager of operations at ACF, the used vehicle retail group of The Funding Corporation, said those with less disposable income and keeping hold of aging cars would be most affected: "We know that many of our customers put off replacing their car because of the difficulties they experience in getting a loan due to past repayment problems."
‘Blemished history’
Rather than "scraping" through an MOT, Jones said people in such a position would now be faced with repairs they could not afford.
ACF began a drive in 2011 to increase referrals of consumers who had been refused finance, repeated alongside a loan approval rate of 35% this time last year, and Jones explained the company would be "flexible" in accepting those with a "blemished credit history" who were struggling with their MOT.
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By GlobalDataThe company would not automatically decline people "who can demonstrate that they are able to afford realistic loan repayments", said Jones.
David Challinor, managing director of The Funding Corporation, speaking at the Finance & Leasing Association Motor Finance Convention in November 2012, added protection of the consumer through transparency of information regarding subprime lending was paramount at the company, saying its repeat custom was "virtually non-existent, for all the right reasons".
The approach echoes comments expressed at a Motor Finance round table in May 2012 where representatives of non-prime lenders including Peter Minter of Moneybarn and Oliver Mackaness and Gary Hill of Billing Finance spoke of the need to determine ‘affordability’ when underwriting subprime loans.
richard.brown@timetric.com
