Raphael Finance and Carfinance247 have independently warned that used car penetration is being adversely affected by automated credit systems rejecting potential customers, and that consumers are looking to borrow less per person, respectively.

According to figures released by the Society of Motor Manufacturers and Traders (SMMT) and the Finance & Leasing Association (FLA), over 4m used cars were sold in H1 2016, of which just over 650,000 were financed at point of sale, giving a penetration rate of approximately 16%.

However Raphaels Finance said the headline penetration rate could be improved upon.

Darren Greenyer, deputy head of lending at Raphaels Bank, said this meant there was a big opportunity for more used cars to be financed as part of the vehicle sale. “With 1st September bringing the new plate, retailers are likely to have increased used car stock.  It’s therefore vital that they ensure they are ‘open’ to all customers,” he added.

Part of the problem, Greenyer suggested, could stem from a focus on affordability and automated scoring systems.

He said: “There has been so much focus in the last couple of years on consumer affordability that the finance solutions used by some dealers may mean they are having to turn away good customers simply because they don’t meet the criteria of automated scoring tools.  Finance should be seen as an enabler of a car purchase rather than a blockage.  Efficient processes, good use of data and technology is a must for lenders, providing dealers and their customers with a compliant, swift, efficient experience.”

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“Many hundreds of families view car ownership as an essential part of their daily lives. But automated credit scoring could rate them poorly because of financial difficulties experienced in the past.  The reality is, however, that with secure and regular income many of these customers may not be as risky as automated scoring tools would suggest.”

Smaller loans

While Carfinance247 noted it had seen an increase in the amount it funded over the period, it also pointed out the customers spent less per vehicle in H1 2016 than in H1 2015.

The company said that from January to July 2016, the amount each person borrowed from us to purchase a car was on average 6% less than in 2015. The average loan amount was £6700 versus £7107 in 2015.

In addition, the online broker found people were paying smaller deposits. This was especially true of women, who put on average 44% less down when compared to 2015.

Breaking down the overall spend of the gender divide between men and women even further, Carfinance237 noted that the average loan taken out by a man in H1 2016 was £6,943, compared to £6,086 by women.