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Since the financial meltdown the high street banks have stayed away from the car loans business. Fingers were burnt and lessons were learnt over big ticket loans. In the meantime the take-up of point of sale dealer finance exploded in an unprecedented manner with a record 1.9 million new and used cars funded through retailers last year.
That’s about to change. Enter Lloyds Banking Group which has become the first bank to offer a secured loan package for the purchase of cars. Initially finance will only be available for used cars through selected dealers but it promises to roll out an offering for new cars in the coming months, although how it hopes to compete against carmaker subsidised plans is unclear.
Whilst it’s a toe in the water and part of the group’s wider strategic move to increase its digital penetration, using its Halifax brand, this could be a wake-up call for dealers.
The Halifax Car Plan Extra proposition is competitive. With its launch timed to coincide with the March plate-change, customers can benefit from interest rates as low as 3.6% on PCP and HP deals, potentially lower than many dealer finance schemes. The concept is simple: customers choose a car, go online to arrange the loan and Halifax pays the dealer direct. There’s a definite no hassle factor.
With carmaker-backed low interest PCPs dominating new car sales it’s likely this package will gain most traction in used finance where dealer profit opportunities are significant. How this will square with dealers (especially those already selling Black Horse Finance point of sale packages) remains to be seen but it’s a clear signal that the banks are looking at the car finance market.