Demand for mid to sub-prime car finance has grown by 112% across the last 12 months, according to motor finance broker Caerus Capital.
As households struggled with the economic crisis, demand for mid to sub-prime finance rocketed, with a 63% increase in applications between first and second lockdowns. This was followed by a 64% increase in the most recent lockdown.
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Sub-prime borrowers taking out credit cards also grew by 143% between August and September last year, according to analysis from the credit reference agency Equifax.
Explaining the effect of the pandemic on the demand for sub-prime finance, Ben Maguire, commercial director at Caerus Capital, said: “The pandemic has caused financial hardship for many families and young professionals who have been furloughed or made redundant over the last 12 months.
“Recent figures from the Financial Conduct Authority estimate that nearly a third of adults have seen their incomes impacted by the coronavirus pandemic.”
Figures from HM Revenue & Customs for January 2021 showed that there were 726,000 fewer people on company payrolls when compared with February 2020.
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By GlobalDataFurthermore, it is estimated that 1m self-employed people are also understood to be without work, many of them not eligible for state support.
Subsequently, many consumers within the prime segment prior to the pandemic have shifted to the sub-prime credit scores.
Maguire continued: “We have experienced a steady increase in car finance applications for sub-prime and guarantor loans, with the average vehicle purchase price sitting at £7,246.
“Our data also shows that there is strong regional divide, with the highest number of sub-prime applications coming from the Birmingham and the East Midlands regions.”
According to Maguire, Caerus Capital is currently converting declined applications to accepts at 79% through collaboration with its extensive dealer network.
“We have a market-leading panel of lenders to support all dealers’ customer finance requirements,” he said. “We are committed to driving up finance conversion rates.”
