Amanda Hall-Davis
looks at how captive finance houses are weathering the economic
storm
Amid the global economic slowdown,
and with major UK financial institutions curtailing their exposure
to the vehicle finance sector as a result of escalating portfolio
losses, what strategies are the lending arms of the car and
commercial vehicle (CV) manufacturers employing to deal with these
turbulent economic conditions?
The slump in CV registrations is severe.
According to figures compiled by the Society of Motor Manufacturers
and Traders, registrations of vans and trucks were down 39 percent
for the year to October. Captives, so closely tied to the fortunes
of their parent brands, have not escaped the pain caused by
collapsing registrations.
Many of the finance captives active in the UK
are supporting their respective retailer networks with a range of
new competitive finance offers, customer incentives and add-on
insurance products, in an attempt to stimulate sales in the teeth
of the recession.
For example, Vauxhall Finance UK is offering
new incentives on Vauxhall’s commercial vehicle range, including
four years of zero percent APR on selected commercial models. This
deal has the additional offer of four years of free servicing,
warranty and breakdown cover. An online van budget planner as an
add-on is available to customers to help with payment planning,
along with the General Motors credit card, which offers customers
the opportunity to collect points which can be redeemed against the
purchase of a new Vauxhall model.
Other strategies being implemented in the
commercial sector include RCI Financial Services UK’s offer of zero
percent APR on all hire purchase agreements on CVs until the end of
2009. Ford Credit Europe (FCE) UK included promotional offers until
December 2009 on the new Fiesta and Transit van range, with fixed
7.9 percent APR and discounts off the retail prices. FCE provides
commercial GAP insurance as an extra, along with varying online
tailored finance packages, and also offers customers online account
management.
With the decline in the commercial vehicle
sector, brands need the protection and dealers the support which
captives can provide, through developing strategies to meet the
specific needs of their customers. But manufacturers’ finance arms
need to avoid resorting to offering large discounts – and thereby
destroying residual values. The focus should stay on building
strong residual values and brand loyalty, with the long-term goal
of increasing market share.
Looking into the future, the gradual
transition of fleets to electric-powered and/or low carbon vehicles
will open up new opportunities for finance providers – highlighted
by the news that Nissan and Sumitomo have started a joint project
to create a secondary market for electric batteries (see
below).
It appears captives are taking into account
the need for diversification strategies to provide additional
selling points. The inter-relation between captives, manufacturers
and dealers is becoming ever-more imperative in order to ride out
the economic storm.
