Secondly, I went and got myself a regular column in the New Statesman in which I have made two arguments that we, at the sharp end of car retail funding, know too well: That dealers are not all "smooth-talking" finance pushers (as any fly on the wall at a Motor Finance round table will know) and that customers are not dullards who can’t calculate repayments. Also, that forecourt finance is such a success at the moment not because of aggressive salesmanship but because of the backing it receives from manufacturers.
There is, however, a larger point to be made – the problem with comparing high street lending to dealer finance is that not many people qualify for the former at decent rates.
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It is certainly dubious, at best, to suggest a Mail reader would be better off taking a loan from a bank branch than taking finance on a car through a dealer.
When looking at the numbers, it makes even less sense.
For a start, according to the Old Lady of Threadneedle Street, the average lowest advertised rate on a £5,000 loan has risen each month, every month, from 8.7% in March 2007 to 15.8% in April this year.
But let’s be charitable and ignore this median, concentrating instead on the personal loan rates of Marks & Spencer, Sainsbury’s, Tesco, and the rest of that bold cadre heading in the opposite direction. If you look at our Data Bank this month, you’ll find eight lenders scrabbling to lend subscribers of thisismoney.co.uk £8,500 over four years at rates between 6.0 and 6.4%.
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These sort of rates, currently being thrown around in an effort to shame car financers by comparison, are representative rates only, which can be secured by 51% of applicants.
Put it this way: The rates championed by those who admonish forecourt finance are fantasies for 49% of people wandering from the bank to the dealership. (I imagine them stopping at a pasty shop to cry over a lunch now mercifully VAT-free.)
Even then, we’re talking about the rarefied demographic that gets to choose between the credit offered by a manufacturer for a new car or a supermarket loan.
Let’s assume our man with the pasty has missed a credit card payment or is behind on the electric, one of the potential millions of people in the UK to do so and who have struggled to buy a car since 2008. There’s a whole industry devoted to helping them purchase a car and, believe it or not, helping them repair a damaged credit history. This industry is not best-pleased with disingenuous news stories.
Louis Rix, director of Carfinance247 was the first to point out the ambiguity of the Mail report and the lack of people who would even bother applying for a 6% loan.
Paul Harrison of the FLA was similarly nonplussed and called the comparison between dealer finance and a bank loan "simplistic".
It was left to Graham Hill of GHA Finance, to really churn out the invective.
"This information is not only misleading, it’s dangerous," Hill told me.
"They aren’t comparing like with like. An HP agreement provides a great deal more legal protection than a personal loan."
Besides which, Sainsbury’s couldn’t package a car, finance and warranty; M&S Bank were offering 12.9% on a £5,000 loan the last time he checked; and, by his calculations, as few as one-in-five of us would end up with the rates advertised by personal lenders.
"As usual, the national press gets it wrong again," he added.
"Steady on, Graham," I said, finishing my pasty. "That’s me you’re talking about, now."
fred.crawley@vrlfinancialnews.com
