Oil and troubled waters

 

Ten years ago, a barrel of oil cost on average $15.35, adjusted
for inflation, according to OilAndGasConfidential.com. Last week,
US light crude hit a record high of $127.82 per barrel, after
Goldman Sachs predicted that the average price during the second
half of 2008 will be $140, with the possibility of $200-a-barrel
oil within two years’ time floated by the investment bank. In the
US, the painfully high cost of a ‘tank of gas’ has led to trouble
for the motor finance sector. People who leased SUVs are now faced
with the double whammy of high monthly payments in a
credit-squeezed environment, and a much lower than anticipated
residual value for their leased vehicle. Some, seeing no other way
out, have resorted to arson attacks on their own cars, in order to
claim the insurance payout and to clear the remaining balance, with
insurance fraud investigators reporting a significant year-on-year
rise in numbers of suspicious car fires. Meanwhile, auto finance
defaults are rising inexorably. 

Will the UK follow the US example? There are signs that a
serious fall in demand for 4x4s is on its way, with Experian
warning dealers to “prepare in advance” as rocketing pump prices,
the recent VED changes (see News, p8) and falling consumer
confidence begin to bite. But it’s not all doom and gloom – at the
recent Motor Finance Europe conference, speaker after speaker
explained how dealers, financiers and fleets can ride waves of
change in the industry, rather than being overwhelmed by them (see
The changing face of motor finance). 

Speaking of waves, the retreat of certain motor finance
providers from point-of-sale lending (see News p5) has made
headlines this month. And as credit becomes harder to obtain,
brokers are proving their importance to the market by keeping the
wheels of motor finance and leasing turning, as our cover story
finds. It’s a tough market out there, and a shake-out of weaker
players is anticipated, but the net result should be a stronger,
leaner and more efficient broker sector, which will benefit the
whole industry.

With best wishes for the coming month.

Jo Tacon
jo.tacon@vrlknowledgebank.com

Motor Finance Issue: 43 – May 08
Published for the web: May 23 08 15:23
Last Updated: May 23 08 15:25