A June survey of UK asset and motor finance executives has provided insight into the current state of the market and the shape of its recovery, according to business consultancy GrowCap.
Survey respondents took a fairly consistent view that there will be lopsided V-shaped recovery, reaching pre-Covid levels by the end of 2021. The shape of the recovery was fairly consistent across the asset, motor and broker markets, the survey found.
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Demand in June has dropped to 40% of pre-Covid levels and is expected to rise to 80% by the end of 2020 before returning to pre-Covid levels by the end of 2021, the survey found.
Portfolios
On average, respondents indicated that 34% of their portfolio was either in a payment holiday or an arrears position.
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Asset finance providers reported on average 31% of portfolios receiving a payment holiday, expected to reduce to 16% in six months. During the same period, asset finance arrears are expected to rise from 5% to 8%.
Motor finance providers presented higher current arrears of 16%, reducing to 12% in six months.
Government schemes
Almost all asset finance providers in the study considered government schemes (such as CBILS) to be “significant” or “very significant” in context of current market demand, with most either accredited or seeking accreditation.
There was a strong agreement that trade associations have played a valuable role throughout the crisis.
Outlook
With many firms focused on managing existing portfolios, a reduction in competitive intensity was seen to offer opportunities for companies focused on new lending and able to respond to changes.
Other opportunities identified, included a faster bounceback for asset finance over other banking products, restructuring of existing deals, continued leverage of government lending schemes, M&A, new digital lending models and increased demand for certain assets, including technology and used cars.
GrowCap is a consulting and services firm focused on the asset and motor sector. In June 2020, GrowCap contacted over 500 UK asset and motor finance executives to gain their perspectives on a range of issues. Thirty-seven responded, providing a snapshot of current conditions, outlook and ambition for the future.
