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Survey finds that prime finance will be more important if there is 2020 recession

Research for Startline Motor Finance shows that 54.6% of car dealers say they expect prime lenders to reject an increasing number of applications next year in a continuation of a trend they have seen during the last 12 months.
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Paul Burgess

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December 9, 2019

TWO out of three car dealers believe that near prime finance will become more important to their businesses if there is a recession in 2020.

Research for Startline Motor Finance shows that 54.6% say they expect prime lenders to reject an increasing number of applications next year in a continuation of a trend they have seen during the last 12 months.

Startline Chief Executive Paul Burgess, said: “I recently read a view of 2020 that said, even if it isn’t technically a recession, it’ll feel like one. There is little question it is going to be economically challenging.

“To some extent, the used car market is a counter cyclical business and tends to do quite well in these conditions but it can only do so with the support of motor finance companies. This is what will make next year so interesting in our sector.

“Our research shows that dealers already perceive prime lenders as reducing their risk appetites and that this will continue into 2020. In these circumstances, there is a good chance that near-prime lending will come into its own as an attractive alternative.”

The research, carried out for Startline by APD Global, showed that 29.8% of dealers already have a near-prime option on their lending panel and 80.7% overall see near-prime as important or somewhat important to their business.

Burgess added: “It is interesting to see the speed with which near-prime lending has established itself in the UK used car market and the value that dealers already place upon it. Given market conditions, it is reasonable to expect penetration to increase next year.”

Furthermore, 89.3% of dealers say it is important for near-prime lenders to have a range of products rather than just HP.

Paul added: “We are seeing the truth of this in our own product range. Startline offers what we believe to be the only near-prime PCP product on the market and this is a product that is proving very successful for several dealers, given both the popularity of PCP in the used car sector and the growing requirement for near-prime lending.”

This research, “The Future of Used Car Finance in the UK”, surveyed 57 dealer businesses including franchise groups, independents, car supermarkets and online specialist brokers.

The sample chosen was designed to be representative of the dealer sector as a whole. All the respondents were senior managers who had responsibility for used car retailing and finance propositions.

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Chris Wright

Chris Wright

Chris Wright has been covering the automotive industry nationally and internationally for 30 years. Following spells with consumer titles he became News Editor of Automotive Management (AM), Editor of Automotive International, International Editor for Detroit-based Automotive News, and Editor of Dealer Update. He has also co-authored several FT Management Reports and contributes regularly to Justauto.com

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