The retail motor finance industry can be difficult when those wanting finance may get turned away due to small discrepancies, explains Simon Gray.
Gaining affordable finance is important, especially in the climate we’re in, and those turning to retail lenders may face problems. I believe there are some points that the retail industry can learn.
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One of which is that, due to the changing world of finance, you can’t always rely on credit scores. Banks and mainstream finance companies focus too much on computerised credit scores without taking a personal approach. People sometimes need a helping hand which is why lenders should take a more common sense approach when assessing finance risk management.
For example, we recently had a customer who was looking for a car for himself. He visited his local dealer but was turned down by their recommended retail lenders. We looked into this and found he was declined finance because of a £26 default on a mobile phone bill. However, he has paid all his hire purchase agreements which showed he could easily keep up with the repayments. Based on this, we proposed the deal to a flexible but prime lender, who underwrites manually and the deal was agreed.
Another problem with credit scores is that if something’s borderline, retail lenders usually decline. But they should give this more attention and request extra information including bank statements or accounts to show if repayments can be met.
If someone has no history of credit, retail lenders usually decline due to the lack of proof of affordability. I believe this should be looked at positively as it shows they are responsible and don’t want to borrow money unnecessarily. It’s not fair to decline someone finance because they haven’t needed to gain it previously. If they can prove they can make the repayments then I see no reason not to provide them with the required finance.
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By GlobalDataIt’s important to look at each individual and make a decision based on more than just credit scores. Those which are ‘maybe’ need to be turned into a ‘yes’ and retail lenders should look at the possibility of moving to manual underwriting.
With an estimated £100,000 worth of sales being lost each year, I believe if retail lenders follow this advice, they could help dealerships secure more deals.
Simon Gray is managing director of Credo Asset Finance and car finance specialist firm Agreed Finance
