Less than 2% of the UK car finance market by value would be considered subprime lending, new research has revealed.
According to a study produced by Apex Insight, subprime finance only occupies a thin slice of the market, squeezed between bank-owned car lenders and manufacturer’s financial services divisions, which hold 51% and 47% of share respectively.
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According to Finance & Leasing Association data, £31,643m worth of point of sale car finance was sold in 2016, meaning the subprime market was worth approximately £633m.
The research examined the financial accounts of the country’s top 30 car finance companies, and looked at the value of the cars against which the agreements were made.
It also looked at the used car finance sector, and found that among independent dealers, only one in five used vehicles is financed, compared to one in three for franchised dealer sales.
Subprime deals in car finance have been a hot economy topic lately, with some media drawing parallels to the reckless mortgage lending that resulted in the US financial crisis.
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By GlobalDataJust two weeks ago, lenders Zopa and Moneyway announced that they were moving away from the subprime sector to shed risk from their portfolio. Zopa cited a worsening in consumer credit conditions, after a period of improvement between 2010 and 2016.
Commentators on Motor Finance, however, have dismissed systemic risks as overblown, explaining that greater accountability for dealers and stricter vetting of customers on part of lenders make for a much more stable system than the papers depict.
“The Bank of England has said it is sanguine about the market,” Adrian Dally, head of motor finance at the Finance & Leasing Association, told Motor Finance. “These are very positive things said by the people that regulate the sector and have been under the metaphorical bonnet looking at what is going on.”
Just two weeks ago, lenders Zopa and Moneyway announced that they were moving away from the subprime sector to shed risk from their portfolio. Zopa cited a worsening in consumer credit conditions, after a period of improvement between 2010 and 2016.
Commentators on Motor Finance, however, have dismissed systemic risks as overblown, explaining that greater accountability for dealers and stricter vetting of customers on part of lenders make for a much more stable system than the papers depict.
“The Bank of England has said it is sanguine about the market,” Adrian Dally, head of motor finance at the Finance & Leasing Association, told Motor Finance last week. “These are very positive things said by the people that regulate the sector and have been under the metaphorical bonnet looking at what is going on.”
