Rising Demand For Car Finance With Less Money To Lend – A Disaster
Monday, 9. August 2010
With the banks currently announcing profits well beyond expectations the Government really needs to step in and start rattling their cages as they continue to lend to simply those that are safest but in many respects don’t need it as badly as those who have been struggling and whose credit history is less than perfect. I have never quite understood how someone (or company) who has experienced a problem and managed to clear all arrears several years earlier, proving that they have the ability to manage their debts, to be a greater risk than someone who may not have had a problem – so far and the lender has absolutely no idea whether they would be able to manage their debt in anywhere near as efficient manner should they suffer a setback. If I was a lender I would much prefer to lend money to someone who has managed their problem than someone who may simply stick their head in the sand and ignore the problem. The reason I mention this is that the Finance and Leasing Association (FLA) has reported growth in dealer finance taken out by consumers on new cars and used cars. New cars have seen the biggest growth with 15% growth in cars financed in May 2010 compared with May last year and a 12 month increase of 20%. Year on year used cars financed by dealers is down but the trend is up with May up by 13% and the 3 months to May up by 4%. At the same time businesses have turned to finance rather than use their valuable cash or overdraft to fund their vehicles with May seeing a 21% increase in new cars funded, which is the same as the previous 3 months increase and a 13% increase in used cars being financed by businesses in May with a 3 month increase of 8%. The problem with all this is that no extra money is being put into the pot by the banks so more customers are chasing the same amount of money making it virtually impossible for those with even just a small credit problem to arrange finance. As more consumers understand products such as Personal Contract Purchase (PCP), sales of this product was up by 90% in December last year, the demand for more finance to be made available will increase which will result in rates increasing and fewer clients being accepted for finance. Do you have a view or have you experienced a problem? Please let me know? By Graham Hill
