The return of repossessions into the remarketing channel is unlikely to have a significant impact on values, MotoNovo Finance has suggested.
The Financial Conduct Authority (FCA) updated the guidance on consumer credit last week, enabling firms to repossess vehicles from 31 January 2021.
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Initially implemented in April 2020, the entire repossession process was prohibited. More recently, however, the rules only applied to physically recovering the car.
This provided time for finance companies to prepare for collections upon the termination of the ban. Consequently, there were concerns that the ban will have created a backlog of repossession cases.
MotoNovo Finance chief operating officer, Dave Briggs, debunked the myth: “Repossessing a car is always a last resort and the volume of cases involved are unlikely to be anywhere near those that are often implied by media articles assessing car finance.”
Despite a significant number of consumers benefitting from forbearance measures offered by finance companies, Briggs expects the incidence of repossessions, in this instance, to be limited.
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By GlobalDataBriggs continued: “The reality is that we see more people voluntarily terminating their agreement than us moving to repossession. These voluntarily terminated cars and other end of contract cars have continued to be made available through remarketing channels throughout the pandemic.”
Published in November 2020, the regulator’s guidance previously stated that firms should not be able to terminate a regulated agreement or repossess vehicles under the agreement that the customer needs, except in exceptional circumstances.
There were growing concerns within the FCA that prolonging the ban could see consumers owing more in the long term, as car values follow their natural depreciation route and as outstanding interest continues to accrue.
Subsequently, On 13 January, the FCA proposed a resumption of policy enabling consumer finance firms to repossess vehicles. Welcoming the news, Briggs adds: “We welcome this news from the FCA which will benefit customers for whom extending the ban could have had unintended negative consequences.”
