Where is the motor finance industry heading?
Back in April, the FCA (Financial Conduct Authority) were due to implement new motor finance rules in their final ruling. However, in the midst of the pandemic, these rules have been delayed till around October this year.
The new rulings relate primarily to the relationship between dealerships and finance bodies and aims to give customers more clarity, allowing them to make more informed decisions regarding their vehicle purchases.
Like many other industries across the country, business in the car finance arena has suffered, dropping by around 94% according to the FLA. This is in stark contrast to figures from 2018 which saw the motor finance industry in the UK reach £64Bn, resulting in it being the third largest lending sector.
The FCA recently announced proposals to continue to support those with motor finance agreements. You may recall that we provided some information around ‘payment holidays’ right at the start of lockdown, if you’ve not yet requested a freeze and would like to, the deadline to apply has now been extended to 31st of October 2020.
9 out of 10 new vehicles are funded by some variation of a finance plan in the UK, meaning many across the country may be struggling when we take into consideration the impact of furlough or redundancies, this is what has spurred on these temporary measures being announced, to support motor finance customers.
There have been some positives in the last month or so, despite online vehicle sales increasing during lockdown, with the re-opening of dealerships, the used car market managed to wiggle back to pre-lockdown levels last month, with growth of 13.3%.
How will this impact vehicle values?
Vehicle values have also remained reasonably stable throughout lockdown which will benefit those in PCP agreements or those looking to change vehicle at the end of their finance agreement.
Some interesting factors to consider around the growth of the industry in the coming months focuses on the public’s view of using public transport. Will we see a decline in rail and bus travel as people opt to travel by car?
Boosting the Motor Finance Industry
The Government also recently announced a £73.5million fund to boost ‘green economic recovery in the automotive sector’.
This will benefit a range of vehicles from personal cars to taxis and vans, with funding being used to research and develop cutting edge technology and recyclable batteries, which can cut carbon emissions. Low emission cars and commercial vehicles will be manufactured in greater volumes with the contribution of this funding.
In addition to helping the UK stay on track with its pledge to be emission free by 2050, the funding will see 14,000 research and manufacturing jobs protected, boosting the economy.
We’ve been delighted to have seen several customers grow and expand their fleet with new commercial vehicles during the pandemic and CAVA is confident that we’ll continue to see resilience from the industry in the coming months.
We’ll keep you updated with any major changes but in the meantime if you require any impartial, no obligation advice, or if you’re considering your options but don’t know where to start, please get in touch. You can call Mike on 0161 222 9599 or use our contact form and he’ll be happy to discuss your needs.