“Near-prime” lender Startline said it has seen an increase in the number of applicants applying for credit who have been declined by a prime lender.
In a release, Startline said it thought prime lenders were tightening lending rules at a point in time when used car retailers need greater flexibility from motor finance.
It added that there are widespread reports across the sector of prime lenders turning down increased numbers of applicants from a wide variety of dealers.
Startline chief executive officer Paul Burgess, said: “In many ways, this is to be expected. Motor finance is a risk versus reward business and, in times when the economy is starting to stall, lenders often respond by making their approach more stringent.
“However, what we are finding confusing is that, as a flexible lender, we have not seen any change in our own default rates and our lending rules are remaining much the same, with just normal, regular adjustments.
“It is unfortunate that, at a time when used car retailers really need their primary motor finance providers to be comfortable with the current situation and support their sales, they appear to be instead taking a step backwards.”
Burgess said that the development had prompted an increase in applications to Startline.
“Clearly, this trend works well for us as a business because more applications are being made to Startline and we are able to approve more. However, it does raise some questions about how prime lenders might react if there is an event such as Brexit in the next few months that does send genuine shockwaves through the economy.”
Since its establishment five years ago, Startline has specialised in HP and PCP products designed to be used when a mainstream prime lender declines an applicant.
Burgess said: “It makes no sense and is unfair that buyers who fall slightly below prime lender requirements very often end up using what we describe in the industry as a ‘sub-prime’ offer. There should be other options.”
In February, the Glasgow-based firm said half of the business it writes with the Trust Ford dealer group for its TrustFord Now proposition uses Startline’s “flexible” PCP product, six months after its launch.
And in May, Startline Motor Finance received a £325m credit facility from investment bank J.P.Morgan.
The arrangement is the second of its kind for the two companies, following a £250m facility issued to Startline in December 2017.