When will the current deadlock in non-prime and subprime motor
finance be broken?
There have been persistent rumours that new entrants are looking
carefully at this market, with a view to making an investment.
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But so far these shadowy interested parties – likely to be
either sovereign wealth funds, Middle Eastern banks or venture
capitalists – have yet to manifest themselves.
Our cover story this month (see A gap
in the market) takes stock of the current state of
subprime and non-prime finance – and finds that, if your backers
keep their nerve, it can be a very profitable place right now.
We are in any case a less liquid society than previously, and
this does not seem likely to change in the medium term.
The Bank of England’s recent Credit
Conditions Survey finds that lenders of all stripes are keeping
tighter control over the purse strings, while defaults on credit
cards and unsecured loans will rise still further.
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By GlobalDataStill, quantitative easing and other
government measures to try and free up the flow of credit will
eventually have an effect – although whether that effect will reach
as far as subprime motor finance is less easy to answer.
Speaking at the RMIF’s annual
dinner, an enjoyable affair held at the Dorchester hotel, shadow
chief secretary to the Treasury, Philip Hammond, said that the
motor industry as a whole faces significant challenges, from EU
regulations to “constrained retail credit supply”, adding: “I am
under no illusion that the future will be easy. Indeed, if it ever
starts to look as easy as it did in 2006 and 2007, be very
suspicious.”
He said that a future Tory
administration would look to keep interest rates low, adding: “We
cannot build a recovery without a functioning credit system and
sustained low interest rates” – while trying to build a “new
British economic model” based on “saving and investment, not
borrowing and debt,” which sounds like a veiled warning to the
motor finance industry.
Will the Conservatives,
traditionally the most business-friendly of the main political
parties, be friend or foe to motor finance lenders?
On a more uplifting note, orders are
now being taken for the ParaJet SkyCar – the world’s first
road-legal flying car. Yes, you too can indulge your wish to fly
high above desert and plain (although wishful thinking about flying
over the M25 car park on a Monday morning at 8am seems misplaced)
for the meagre sum of £50,000 – with £10,000 payable now, and the
balance to be remitted by 100 days before delivery.
Have the SkyCar’s makers not heard
of motor finance? It seems likely that a discreet white-label deal
with an interested finance house could perhaps broaden the airborne
auto’s customer base – especially in these cash-poor times.
Finally, this issue is no 60 –
marking Motor Finance’s fifth anniversary.
The first issue of MF – a successor
to Credit & Car Finance – asked on its cover whether
“point of sale finance can save the industry”. The cover story
noted that dealers needed to sell F&I to shore up their profit
margins, as selling cars alone was not enough to keep them
afloat.
It’s good to see that so much has
changed in the intervening years…
Jo Tacon
