Flexible motor finance to become important in a hard Brexit

Flexible motor finance to become significantly more important as a product in the event of a hard Brexit in October, says Startline Motor Finance.

Paul Burgess, CEO at Startline, highlighted that with the economy already at high risk of a recession, consumer confidence likely to be adversely affected and range of other negative effects, there is a strong chance that leaving the EU could affect the motor finance sector substantially.

He said: “It is not a political comment to say that even the best hard Brexit outcome would be bad for the economy and the worst could be very damaging. Almost no economic experts see a positive effect in the short-medium term.

“This is likely to influence all aspects of the used car market and motor finance will not be unaffected. Given historical precedents, underwriting rules are likely to be tightened just at the point in time when used car retailers really need some additional flexibility.

“That is why we believe that flexible lending could prove to be an essential part of any dealer lending panel over the coming year and beyond.”

Noticeably higher unemployment or an increase in defaulting on loans caused by a hard Brexit would serve to exacerbate the situation.

Startline is therefore taking a flexible approach based on identifying motor finance customers who it believes to be strong credit risks but often do not meet the requirements of prime lenders because of their work patterns or socio-economic factors.

Burges said: “Our view is that the motor finance sector has been lagging a little way behind the manner in which work and home ownership patterns are changing for some time.

“Our approach is to spend more time looking at these people in order to build up a comprehensive and realistic picture of whether they are a good risk.

“We are able to offer these borrowers rates and general conditions that are comparable with prime lenders and certainly a world away from the sub-prime sector.”