Dealers need wider range of finance options

Dealers should be pushing for their lending panel to include a wide range of options as the traditional binary prime/sub-prime model offered by more than half of them no longer fits buyers’ credit profiles.

One lender, Startline Motor Finance, says the market needs more sophisticated options and a much wider range of them to suit many customers who want to buy a used car but perhaps have a worse credit rating than they expect. Although not putting a figure on how many stages there should be in the lending spectrum, it says the two available in the binary system is nowhere near enough to fit customers’ needs.

Paul Burgess, chief executive, said:

“What is clear to us is that there is a much wider spectrum of finance needs in the market. Quite how many is difficult to say but it would not be a stretch to suggest that the market should perhaps be operating over at least five identifiable levels that are easily understandable to dealers and car buyers.”

Over the past several months it has undertaken a study into the sector focusing on what dealers need and what lenders offer. Towards the end of last year it published a report – The Future of Used Car Finance – which said that while around a third of dealers have a near-prime option from their lenders and an overwhelming majority see it as a core part of their business, more than half the finance houses still only provide the binary choice. It also says that many dealers anticipate lenders tightening up on which applications they will approve throughout 2020 as the appetite for risk drops.

Market needs more innovative products

While Startline is one of those with a wider choice of packages, Burgess says the industry as a whole needs to react to a changing and challenging economic background.

“What the market really needs is more innovative products. As you would expect, we have plans ourselves, but there are other customer demographics and characteristics where opportunities lie and it is up to motor finance providers – both new and existing – to meet them.

“We believe that this is especially important at a point in time such as now when economic conditions might be quite difficult over a relatively a long period of time, depending on how leaving the EU and other factors play out.

“Acting to enable car buyers to make the purchases they want to make will become an ever more important factor in maximising sales – and the right finance products are needed to do that.”

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