Another decent year for motor finance

Roughly 12 months ago I sat down to an Editor’s Letter at the end of 2014.

In it, I spent a few hundred words reflecting on what everyone in the industry had been telling me: that 2014 had been a very good year, and 2015 was shaping up to be not half bad itself.

Despite this, a potential interest rate rise, an increasingly burdensome regulatory scene and questions over what will happen if and when new car sales plateau were questions which had been asked.

As I sit here today, it strikes me the message for 2015 is fairly similar. People have been telling me that 2015 has also been a good year in general. New car sales haven’t grown at quite the same rate, especially in the private sector. For the 12 months of 2014, private new car sales jumped 9.8% year-on-year, while the first 11 months of 2015 have seen private new car sales grow 2%. Nonetheless new car sales have grown, and the volume and value of finance sold for both new and used finance has grown over 2015.

Many of the questions about the future remain the same as well. Interest rates have remained firmly anchored at their record low throughout 2015, and questions are still being asked about what will happen if they rise. 

The Financial Conduct Authority (FCA) also remains a potential hindrance to growth, depending on what it decides to do.  While there has been an undoubted increase in knowledge on both the part of the regulator and the industry, the FCA has shown on a number of occasions it is willing to make substantial changes to regulation, while only giving companies a short time to comply, as it did with the sale of GAP. And, as new car sales have begun to slow, and finance has reached unprecedented level of penetration, questions must also be asked about how long this growth can be maintained, and what happens if it slows down.

None of this is to say the year has been without new or unique events. One such event was Motor Finance’s inaugural European Conference and Awards, which took place in Germany earlier in the year. We’ll be returning to Germany for the next conference in April 2016. After the success of the 2015 event, hopefully I’ll see many of you there.

On a more negative note, the VW emissions scandal from late September brought the industry’s reputation into the spotlight. The German brand has worked hard to repair its image after the story broke, and its sales have remained roughly in line with the general industry norms since then, both in the UK and the rest of Europe.

What the long-term damage is, only time will tell, but regardless, the story was a harsh reminder that, no matter how great your finance product is, outside factors (in this case the problem came from the captives’ parent company itself) can happen suddenly and in a way that’s hard to predict.

Beyond the above, the past year has seen some notable industry luminaries leave the industry or country, such as Andy Gruber returning to Germany from Alphera and Chris Sutton from Black Horse retiring. This has seen a bit of a shuffle at the top at a number of companies. At the same time, we’ve continued to see a number of new players enter the industry, and existing brokers and lenders receive funding from outside.

All this leads to an exciting outlook for 2016. There are still opportunities in the market, especially when it comes to digital products. 2015 saw the likes of MotorNovo and Black Horse introduce new point of sale technologies designed to remove as much paper from the process, however there’s still a long way to go.