IN-HOUSE LENDING
Page 16
Page 17
If you've noticed an error in this article please click here to report it so we can fix it.
The rush by operators to replace their fleet with Euro-5 trucks before next January's Euro-6 deadline has played a major part in helping the CV finance sector maintain a good — level of business, especially the in-house lenders
A IR-6.-§sihig •
When ING Lease quit the asset finance market late last year, used truck dealers, operators and brokers were left wondering how an £80m-a-month funding gap was going to be filled. And when December 2012 saw the number of finance deals fall 25% to £336m, compared with the same month in 2011, the sector appeared to be in turmoil.
However, recent figures released by the Finance & Leasing Association (FLA) show the sector has seen significant growth in new investment throughout 2013. June alone saw a 13% increase in lending to £463m, just 1% down on June 2012. Peter Collins, CEO at MAN Financial Services, believes the looming Euro-6 deadline is a blessing for lenders. "As we move into Euro-6 we have a lot of Euro-5 trucks available, so fortunately we are seeing many
operators come to us. Currently, 48% of every used truck is funded by us and during the second half of this year, it is forecast that we will have a 54% penetration," Collins tells CM.
He adds that funding by in-house lenders such as MAN Financial Services, which has a close link with MAN Truck & Bus, has been on the up in recent years, especially since high street banks have been reluctant to help operators finance new or used commercial vehicles. He puts this down to the banks' lack of understanding of how the transport sector works, and how much trucks are worth.
"Banks are shrinking their local business teams and they have a reluctance to fund trucks because they often don't understand how to value the asset," says Collins "They are picky about who they want to lend to, but this works for us as it increases our business."
Volvo Financial Services has also seen an increase in new and used finance deals since ING UK's departure from the market. Sales director Phil Wilkes says 2013 has been a strong year for the company so far and he is confident that healthy business will continue throughout the rest of the year.
"Lending is up because we have sold more vehicles and generally it has been at a consistently high level," he says.
Wilkes adds that the number of finance deals for used trucks Volvo Financial Services has offered hauliers in recent months has also been consistent, which he puts down to the level of support the company receives from point of sale at Volvo Used Trucks and independent used Volvo dealers.
He says the gap left by the departure of one of the UK's biggest financiers has not had much effect on Volvo, other than seeing less competition from brokers.
MAN's Collins agrees: "Since ING left I haven't seen a lot of change in the market since their route to market was through lenders. There are very few lenders in the market."
No help from government
After a difficult December and poor finance growth in the last quarter of 2012 across the sector, fears for 2013 were not helped by the government's Funding for Lending scheme, which does not include manufacturers, says Collins "They should be focusing on providing us with working capital," he says.
However, 2013 has also brought opportunities for more asset finance providers to enter the market, especially in the commercial vehicle finance sector, says Sean Geddes at Genesis Capital.
"There have been a number of new entrants to the market, with more in the wings, and the existing players have all recruited a large number of ex-ING staff while increasing their liquidity to seize the chance to increase their market share," he says.
But while more funding providers are entering the market, Geddes warns that it is becoming difficult for operators to find the asset finance provider with the structure and facilities they require, as well as a decent appetite and rates.
"It makes real sense to align yourself with a well established, reputable intermediary who can give you access to a host of funders that you otherwise wouldn't be able to work with, and you'll get the benefit of their market knowledge and expertise to ensure you get the best possible deal," he advises.
The outlook for the rest of the year remains positive for most providers of commercial vehicle finance, with a recent confidence survey carried out by the FLA showing that new business is expected to increase by more than 10% in the direct finance channel during 2013. Collins at MAN Financial Services says: "We have
always had very strong penetration figures and as a manufacturer funder, we're at our peak. Our volumes over the last couple of years have been very high and we expect this to continue."
Wilkes agrees that Volvo Financial Services' prospects are also looking good, following on from a high level of lending during the first half of 2013.
Genesis Capital, which Geddes says has seen an increase in business across all asset types over the past 12 months, also believes the market has recovered well from its slight dip in the latter part of last year. "Despite losing a very major player in this space the market has adapted well and coped with what has been a buoyant period of lending," says Geddes. •