The government has announced a £2.3bn package
of financial support to UK-based car manufacturers.
However, the state aid plan – in the form of
loan guarantees, including £1.3bn from the European Investment Bank
– does not set out any help for motor finance
companies.

Instead, it is targeted at manufacturers’ efforts to develop
low-carbon technology, as EU competition laws allow state subsidies
for green industries.

The £2.3bn figure is dwarfed by the €6bn in state aid recently
unveiled by France, with Germany also having offered a financial
lifeline to its manufacturers – along with loan guarantees for
captive finance arms.

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But relief for car finance providers could yet be in the offing
as the new trade and investment minister, Mervyn Davies, is to put
together a scheme to help captives to access much-needed
liquidity.

It is thought that the government initially shied away from
offering outright support to motor financiers, as any money
provided by the state could be used by consumers to acquire
vehicles which were not manufactured in the UK.

However, any injection of funds to car finance providers would
be a shot in the arm for the UK motor retail industry, with its
many thousands of employees. Tightened underwriting standards at
finance companies and the withdrawal of several players from the
market have made it much harder for consumers to finance new and
used vehicles, which has had a direct impact on dealers’ sales
volumes.

Representatives of the motor finance industry have expressed a
guarded welcome for the news – with the proviso that more help for
motor finance must be forthcoming.

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Stephen Sklaroff, director-general of the Finance & Leasing
Association, said: “We are encouraged that in his statement Lord
Mandelson acknowledged the importance of motor finance in helping
to kick-start the economy. We look forward to early discussions
with Mervyn Davies on how best to support all types of lenders to
free up credit for new and used cars.”

The CEO of the BVRLA, John Lewis added: “While this package of
loans and loan guarantees is a big help, car makers also need
customers that are able to buy their products.

“We will continue to call on the government to ensure that motor
finance providers of all types have access to government liquidity
and guarantee schemes so that they can help businesses and
consumers upgrade to cleaner and more fuel-efficient
vehicles.”