With some leasing companies pulling out of the broker
market and fleet funders culling their broker panel, Adam Tyler looks at brokers’ place and
future in the contract hire and leasing sector

The withdrawal of funders from the
vehicle finance broker market has just become an issue for this
sector of the market, although readers of Motor Finance’s
sister publication, Leasing Life, will be aware the issue
has affected leasing brokers for the last year or more.

Commercial mortgage funders started to withdraw
from this sector of the market around two years ago. That’s not to
say it is not painful – simply that it is the last sector of the
market to really feel the pinch.

Rightly or wrongly, when things start to go wrong,
brokers often have the finger of blame pointed at them. Over the
last 12 months, some lenders and funders have looked at their
existing book, and decided 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 has been
either severely restricted or cut off altogether.

Another view

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’ and funders’ drive for volume and market
share eclipsed all other considerations (including the quality of
the business they were underwriting), it is hardly fair to then
blame the broker for the introduction. Nevertheless, the result has
been a contraction of wholesale funding, to bank-owned leasing
companies and to both back-to-back and undisclosed agency
agreements alike.

How well do you really know your competitors?

Access the most comprehensive Company Profiles on the market, powered by GlobalData. Save hours of research. Gain competitive edge.

Company Profile – free sample

Thank you!

Your download email will arrive shortly

Not ready to buy yet? Download a free sample

We are confident about the unique quality of our Company Profiles. However, we want you to make the most beneficial decision for your business, so we offer a free sample that you can download by submitting the below form

By GlobalData

But it’s not all bad. The current conditions are
presenting the industry with a fantastic opportunity to clean up
the debris and ensure these issues do not raise their heads again.
In other words, the tough times faced by the industry at the moment
could have a very positive end result: finally, quality is
triumphing over quantity and the market is having a good
clean-out.

So, in line with its counterparts in other sectors
of the broker market, vehicle finance brokers are looking toward
the next 12 months with a degree of trepidation. Recent flurries of
‘green shoots’ have so far proved to be no more than a bit of light
relief. But vehicle finance brokers are not alone in these tough
market conditions and the time will come when the clouds begin to
lift. When that happens, I would not be surprised to see some
familiar faces return to the broker channel in the next year or
two. In the meantime, the wise funders will continue to utilise the
broker as a very effective and cost-efficient route to market.

The author is chief executive,
NACFB