The adverse effect of low used vehicle prices is having a
growing impact on car lenders as hire purchase (HP) agreements
cause problems for the industry.
Last October, Stephen Sklaroff, director-general of the Finance
& Leasing Association (FLA), wrote to the UK Minister of State
for Trade and Consumer Affairs, stating the latest round of
members’ concerns regarding voluntary terminations (VTs), and the
changes to the Consumer Credit Act (CCA) that came into effect in
April 2008.
Go deeper with GlobalData
Sklaroff said that the removal of the £25,000 financial
protection limit had resulted in a “dramatic” increase in the
number of HP agreements regulated under the act.
This had had a particular impact on luxury car lenders who were
increasingly using the CCA’s VT clause despite not being in
financial hardship. Once again the FLA stressed that the retention
of the VT clause was inconsistent with the clause’s original
purpose of protecting vulnerable consumers.
Sklaroff underlined the “serious imbalance” between the cost of
the VT provisions to finance companies and the consumer protection
it provided, and asked the government to consider ways of
mitigating the adverse impact of the VT clause. As in previous such
supplications, the government’s response was vague and
uncommitted.
The continuing haemorrhage of car lenders’ profits caused by VTs
is being exacerbated by motor dealers’ sales staff. With the
falling footfall in showrooms over recent months there are
re-current examples of buyers being “shoehorned” into going for a
VT of their existing HP agreement, as the ‘best’ way to acquire a
new vehicle. One motor industry observer commented: “You can see
why struggling motor dealers would do this, as right now moving
metal is their overriding concern. But the losses finance companies
suffer from VTs mean that if they suspect their dealer partners are
encouraging customers to get out of HP agreements, it could
seriously sour relations, and cause longer-term problems for all
involved.”
How well do you really know your competitors?
Access the most comprehensive Company Profiles on the market, powered by GlobalData. Save hours of research. Gain competitive edge.
Thank you!
Your download email will arrive shortly
Not ready to buy yet? Download a free sample
We are confident about the unique quality of our Company Profiles. However, we want you to make the most beneficial decision for your business, so we offer a free sample that you can download by submitting the below form
By GlobalData
