If you read Motor Finance’s sister
publication, Leasing Life, you will undoubtedly be struck
by the fact that the leasing market seems to have turned into a
viper’s nest of fraudsters and financial crime (see Leasing
Life, July 2009).
From glancing through the headlines it appears as
though even large and respectable firms have become mired in
unsavoury business practices of others’ – or sometimes even their
own – making. Certainly, the problems caused by the crisis in the
finance markets has left many less than scrupulous business
practices flapping on the beach as the tide of easy credit pulls
back.
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Rightly or wrongly, brokers often have the finger
pointed at them when things start to go wrong. Lenders and funders
look at their existing book, and declare that business introduced
by brokers is subject to a higher default rate than business from
direct channels, and because of this, the broker arm of the
business will be either severely restricted or cut off
altogether.
This seems like a logical way forward, but while
not disputing the lenders’ analyses of their own books, I would
like to suggest that the picture is not quite as clear-cut as it
first appears.
As I have argued before, because many lessors’
drive for volume and market share eclipsed all other considerations
(including the quality of the business they were underwriting) it’s
hardly fair to then blame the broker for the introduction.
The fleet industry is looking to keep its own
broker house in order in a slightly different way. In the world of
vehicle finance, again rightly or wrongly, it is the smaller broker
who has been deemed to be the root of everyone’s problems.
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By GlobalDataHowever, in a move away from the rest of the asset
finance industry, the BVRLA is looking to make brokers responsible
for their own, by asking smaller brokers to team up with larger
broker firms to place business through them.
Rather than the end funder being responsible for
due diligence on smaller brokers (which, if the experience in the
leasing industry is anything to go by means they simply stop
dealing with them altogether) the larger broker becomes the conduit
for the smaller broker to get to market. Obviously, this solution
is not without its difficulties – but at first glance at least the
smaller broker is not left completely out in the cold.
And even the larger brokers have got their work cut
out to keep afloat in the next 12 months.
In difficult times, people cut back on their
spending, and large purchases – like cars – are one of the first to
go. Fleet brokers are not immune either. Research by Sewells
reveals that fleets are renewing less frequently; it is now common
practice for fleets to hold on to their cars for longer.
The survey suggests that six year-old fleet cars
could become more common, with half of diesel company cars only
being defleeted after 100,000 miles. There may be a few clichéd
‘green shoots’ – but they’ll need strong roots to survive in this
market.
The author is chief executive of the
NACFB
