Consumer lease

Photo of Tony HillOver the past
couple of years, one of the biggest stories in the business has
been the wholesale loss of subprime lenders – sad, but somewhat
more understandable than the loss of leasing companies willing to
lend to consumers.

As the economy spiralled downwards,
prime lenders found it hard enough to collect their debts, so it
was hardly surprising subprime lenders found it virtually
impossible to collect money from even more vulnerable businesses
and consumers.

We understood that, with less money
to lend, leasing companies would be even more reluctant to lend
into the subprime sector – but what has caused them to pull away
from consumers as a whole?

There is a huge market desperate to
understand how leasing can help them to drive new cars while
improving cash flow and yet it is pretty much being ignored.

As we read, businesses are selling
off company vehicles to release liquidity, while offering employees
cash with which to finance private cars. This means there is
greater pressure on leasing companies to lend to employees – or
consumers – in any case.

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But not one of them seems to have
taken the initiative, (and definitely not via brokers) to
capitalise on this potentially huge market.

It was a great disappointment when
Lombard withdrew from the consumer market as well as the broker
market, especially at a time when there was a growing need for
personal leases. Lex stirred similar feelings when it withdrew from
the consumer market and dropped the majority of its brokers.

But why? One could argue that the
leasing companies are only looking for multiple vehicle deals, but
in the current climate we find SMEs with 10 to 15 vehicles treating
each vehicle requirement as a one-off and searching the marketplace
for the most competitive rate. In these cases, each requirement is
no different to an individual consumer looking for a one-off

Maybe it is the higher level of
risk involved. We know leasing companies appear to rely upon
statistics to create their lending policies, but as some lenders
have shown, they can overcome the increased statistical risk
attached to consumers by adjusting rates to suit risk.

We now see some lenders offering
two-tier rates on business contract hire and personal contract
hire. With some, the difference can be as low as £3-£5 plus VAT a
month, while others can be as high as £45 plus VAT a month. I don’t
know that this is a true reflection of the increased risk – but I
do know that there is a huge lost opportunity here.

Instead of scratching their heads
trying to come up with new ways to fund cars, maybe the leasing
companies should look at ways of moving existing products out to

And don’t assume this situation
only applies to independent companies – the same applies to
captives. It is my understanding that, while VW Financial Services
will provide finance to consumers, they only provide campaign rates
to businesses.

Isn’t it about time that lenders got a grip – or is money so
tight they are simply seeking more reasons not to lend?