FEW of the lessons that the motor finance sector learnt in the 2008 financial crash will apply to the process of recovering from the coronavirus crisis predict Startline Motor Finance.
Chief Executive Paul Burgess said that there were almost no parallels between the two economic downturns.
He added: “Many or even most of the people who are now senior managers in motor finance companies were already working in the sector during the 2008 crash and there is a temptation to look at the current situation in similar terms.
“However, the global situation then was very much about the supply side. There was a lack of available credit and the underlying problems were created by some dangerously poor underwriting decisions compounded into questionable investment products.
“The answer was to increase liquidity by pumping money into the market while ensuring that lending of that kind was prevented in the future and banks behaved more responsibly.
Appointed Representative Opportunities with Wessex Fleet
Have you thought about growing your broker business? Are you looking for opportunities for growth? Then why not consider joining Wessex Fleet as an Appointed Representative?
Keeping you on the move with leasing solutions tailored to your needs
Leasys is the proud Contract Hire partner of the Stellantis brands, offering mobility solutions from medium and long-term rentals to management systems for company fleets.We work with Brokers to support all their customers requirements.
Accelerate your business with QV Systems & Leaselink
Unlock unparalleled efficiency in vehicle procurement with QV Systems’ Accelerate, now seamlessly integrated with Ebbon Automotive’s Leaselink. Tailored for brokers and funders, this integration streamlines the entire process from quote to delivery, empowering you to effortlessly source and order vehicles for your clients.
“Today, the problem is more about demand. Even though we have seen a strong post-lockdown bounce in the used car market, people are generally refraining from spending or borrowing in the wider economy and that will have an impact on the speed of recovery.
“Especially, as bad news inevitably starts to accumulate over the second half of the year in the shape of large scale redundancies and business failures, these negative effects on consumer behaviour are probably only going to become stronger.”
Burgess said that the solutions which worked would probably be the ones that helped to preserve a higher degree of confidence in the economy.
“Really, the government faces a double challenge when it comes to confidence. It needs to enable people to be active in the economy while ensuring that they feel protected from coronavirus, but it is also about stepping in to save jobs and businesses that remain fundamentally viable.
“The same principles apply to the motor finance sector as a part of the economy. We need to ensure that we are providing products and advice that help people feel sufficiently secure in their borrowing choices and physically safe when it comes to buying cars.”
He said that it was interesting to see ideas such as the guarantee introduced by Ford of America on new cars, where the manufacturer agreed to buy back any vehicle bought if the consumer was made redundant.
“I’m not proposing this as a product that is suitable for the UK used car market but it does show the degree of innovation that can be brought to motor finance, and it directly tackles some of the issues that are stopping people from buying new cars on finance.
“Certainly, we expect to see manufacturers, dealers and motor finance companies step up to the plate in terms of identifying innovations over the next few months that will help to stimulate a general recovery. We believe that personal security – in terms of health and financial well-being – to be a key feature of these ideas.”