Jonathan Mills and David Farnell of Addleshaw Goddard look ahead to next month’s road tax changes and analyse the implications for motor finance lenders
From 1 October drivers will no longer have to display a paper tax disc in their vehicles. The tax disc was introduced 93 years ago and will be replaced by a new electronic system. Many would say that the change is not before time. But what are the implications for motor finance lenders? Although not widely publicised by the DVLA, many readers may know it is possible to check the tax status of any vehicle online at: gov.uk/check-vehicle-tax
Go deeper with GlobalData
Access deeper industry intelligence
Experience unmatched clarity with a single platform that combines unique data, AI, and human expertise.
The new electronic system for taxing vehicles will means lenders can establish through the Motor Insurance Database and the above website whether a particular vehicle has insurance, tax and a valid MOT certificate.
Lenders will therefore be better placed to see whether their customers are in breach of their obligations under motor finance agreements and gather clear evidence of breaches.
Many lenders’ standard terms and conditions provide that the customer must operate the vehicle lawfully and/or ensure that he or she has valid road tax, insurance and if necessary a current MOT certificate. Evidence of a breach of such provisions may be used to support an application to the court for an interim delivery-up order (IDO) in an appropriate case.
A lender should consider making such an application to safeguard its asset, rather than waiting for the police to impound the vehicle in question (because they may not do so promptly, if at all, and the lender’s risk may be heightened in circumstances where an HPI/Crushwatch registration has been overlooked at the inception of the agreement).
US Tariffs are shifting - will you react or anticipate?
Don’t let policy changes catch you off guard. Stay proactive with real-time data and expert analysis.
By GlobalDataOn making its application, the lender would need to prove its ownership of the vehicle, the customer’s breach, that the breach has led to the termination of the agreement (so that the lender is entitled to the vehicle’s immediate possession) and that the vehicle is at risk.
The court must first decide whether the vehicle is or may become the subject of proceedings for wrongful interference/conversion and if so, consider whether to exercise its discretion to make the IDO.
The better the evidence that there is a risk to the vehicle, the more likely it is that the court will make an IDO.
The new electronic system for taxing vehicles means that a lender may now demonstrate categorically to the court (by disclosing details of the website search results) that a customer may be operating the vehicle without tax, insurance or an MOT certificate. In turn, the risk to the public may persuade the court to make an IDO. The main benefit of this action is speed. In an appropriate case (and subject to service of any contractual and/or Consumer Credit Act notices which might be needed) it’s not unusual for the lender to obtain an IDO within seven days and subsequently take back the vehicle.
Time will tell whether the forthcoming changes will see an increase in use of the IDO procedure, but in our view the changes are beneficial to lenders.
