There is no time like the present to
sharpen one’s credit processes, although research by Leasing
Life reveals that the extent to which this is being done
varies considerably between companies. This is particularly the
case with captive leasing companies.
BMW Financial Services, for instance, says the
criteria set by its score card to determine customers’ credit
worthiness have not been changed.
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It is, however, focusing more on good credit
quality, and Juan Ridao-Alonso, its general risk manager, now
checks each credit application individually using several score
cards to determine customers’ histories.
The company has seen an increase over recent
months in the number of car finance applications which have been
turned down, although largely only in the first hand sector.
Also, not unlike other lessors, BMW FS has
seen defaults going up for the first time, although this is
compared to very low levels in past years.
Scania Financial Services, the captive of the
Swedish truck manufacturer, however, is taking a tough stance when
it comes to credit decision-making.
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By GlobalDataIt has doubled the size of its customer
deposits to 10 percent plus VAT, and also says it is less likely to
deal with risky profiles and handle VAT deferrals.
Its marketing director, Alan Rhodes, claims
his captive is better-placed than banks to deal with the downturn
because “for banks, CVs are just one of the assets they finance
while for us it is the only asset”.
He adds: “From a credit perspective, captives
understand customers better, and will therefore look at more
relevant credit information than banks do.”
VW Financial Services, meanwhile, has taken
even tougher measures to cope with the downturn, including
recruiting more staff into its collection and recovery areas. This
has been partly in response to a rise in customer insolvencies.
Also, a year ago it launched new score cards
which automatically reject any company with County Court judgements
against it.
VW says this move was not due to market
deterioration; instead, it formed part of a general improvement of
its credit processing procedures.
As VW FS’ main business is funding
dealerships, it continues to gather forward-looking information
about dealers, including their cashflow and sales performance.
Also, when the car market in 2008 declined by
25 percent last year, Jean Smith, head of the VW FS department that
examines dealers’ risk, was tasked with forecasting where the
bottom of the car recession would be, and how this would affect
VW’s own portfolio.
