Focus On Subprime Finance In 2020 Say Dealers
- December 10, 2019
- Posted by: John Swift
- Category: Automotive Industry
Most dealers expect there will be a resurgence in subprime finance next year for used car purchases as lenders rein back on how much – and to whom – they are prepared to advance.
Startline Motor Finance says its own surveys show that a clear majority of around two-thirds believe that near-prime, or subprime, finance will become more important to their businesses if there is an economic slowdown in 2020. More than half also say they expect prime lenders to reject an increasing number of applications next year, continuing a trend they have seen during the last 12 months.
Paul Burgess, CEO at Startline Motor Finance, said:
“I recently read a view of 2020 that said, even if it isn’t technically a recession, it’ll feel like one. There is no question, it is going to be economically challenging.
“To some extent, the used car market is a countercyclical business and tends to do quite well in these conditions but it can only do so with the support of motor finance companies. This is what will make next year so interesting in our sector.”
Reducing their risk appetites
“Our research shows that dealers already perceive prime lenders as reducing their risk appetites and that this will continue into 2020. In these circumstances, there is a good chance that near-prime lending will come into its own as an attractive alternative.”
The research carried out for Startline showed that 30% of dealers already have a near-prime option on their lending panel and 81% overall see near-prime as important or somewhat important to their business. Furthermore, 89% of dealers say it is important for near-prime lenders to have a range of products rather than just HP.
“It is interesting to see the speed with which near-prime lending has established itself in the UK used car market and the value that dealers already place upon it. Given market conditions, it is reasonable to expect penetration to increase next year.”