07 May 2013

The Annual General Meeting of the Finance and Leasing Association (FLA) may not sound like the most exciting social event in the calendar but, once you realise the men (and a few women) in the room are the people keeping our industry afloat, it takes on a whole new meaning.

Motor finance is booming and point-of-sale finance – the stuff you sell in the dealerships – is doing especially well. According to the FLA, it’s up 18% by volume in March and 22% by volume in Q1. Values are rising faster, suggesting customers are borrowing more on each car.

So the finance chiefs at the AGM, especially those working for manufacturer captive companies, were a happy bunch and the wine flowed freely. They are in the volume business: more loans means more volume means lower rates.

They were also refreshingly honest about the reason for their success. In their jargon, it’s ‘subvented’ finance, but we know it as manufacturer support. For the new car customer it means the deal is simply too good to walk away.

In many ways, this explains the steady rise in new car retail sales this year. It’s not pure customer demand, it’s not pre-registration; it’s a combination of pent-up demand and retailers doing a bloody good job of turning prospects into new car buyers.

The finance director of one major group told me: “If you come into one of our showrooms looking for anything up-to a two year old car, I guarantee you’ll walk out with a new one. The deals are so good, you’d be mad not to – and we wouldn’t be doing our job.”

Quite what this is doing to the nearly-new business is another issue. But then you can’t have it both ways. Right now the priority is keeping factories churning and volumes up.

Money is cheap and customers recognise a good deal when they see one. Not only that, but we’re also rebuilding the car parc of franchised new car customers – and in the medium term that can only be good for aftersales.

Rupert Saunders

See also: Motor finance boom drives sales

Join our LinkedIn group and share your your views with us – and other readers

Tags: car finance. boom, Finance and Leasing Association, FLA, new car sales, private sales