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Banks Pull Out of Car Finance

Posted on 29. Apr, 2009 in General News

According to a report from Trend Tracker – The UK Retail Car Finance Market 2009 – banks may pull out of car financing because of their weakened balance sheets and the badly hit UK new car market. The value of the UK retail car finance market has fallen by 58% in real terms in the last five years. Direct lending has fallen faster than dealer finance.

The weakness of the car market may combine with their weakened balance sheets to encourage some banks to exit car finance. With low interest rates already in place, the return of consumer confidence will be key to the recovery of demand. Car finance demand will return over the next five years, but not to its peak level of 2003.

The total UK retail car finance market, including dealer point of sale and direct lending, halved in value between 2003 and 2008 to a total of £22.8 billion. In terms of the volume of finance agreements in this same period, dealer POS finance sales declined by 26%, but the direct car finance market – comprising unsecured and secured personal loans – witnessed a huge 60% fall. This discrepancy shows how the dearth of credit available from direct lenders has been a major cause of the decline in the UK’s new and used car markets.

Source: Motor Trader 28-04-2009

Tags: Banks, Car Finance