Peter Hunt analyses FLA statistics
published for the year to July 31 2007

Highlights

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In July, FLA members wrote £7.5bn of new business. Both business
and consumer finance grew modestly on a month-on-month and annual
basis. As predicted in last month’s article, business car
finance rose in July to reach its second highest figure for the
year to date, £665m. Used car finance for business customers
appears to remain relatively stable through the year (six of the
last eight months reporting volumes between £57m and £63m), with
spikes more apparent in new car finance. Though down 11 per
cent on a monthly basis at £947m, consumer motor finance has shown
five consecutive months of year-on-year growth, up 8 per cent in
each of the past two months and 3.6 per cent on a YTD basis. As
with the business sector, used car financing appears
reHighlights

In July, FLA members wrote £7.5bn of new business. Both business
and consumer finance grew modestly on a month-on-month and annual
basis.

As predicted in last month’s article, business car finance rose
in July to reach its second highest figure for the year to date,
£665m. Used car finance for business customers appears to remain
relatively stable through the year (six of the last eight months
reporting volumes between £57m and £63m), with spikes more apparent
in new car finance.

Though down 11 per cent on a monthly basis at £947m, consumer
motor finance has shown five consecutive months of year-on-year
growth, up 8 per cent in each of the past two months and 3.6 per
cent on a YTD basis. As with the business sector, used car
financing appears relatively stable, with greater variation in new
car volumes. YTD consumer motor finance volumes of £7.1bn have a
split of 51 per cent new, 49 per cent used cars. YTD business motor
finance new business

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volumes were £4.3bn. Following June’s 227 per cent monthly
growth, true to form, big ticket volumes dropped almost as much in
July to

£168m. Meanwhile, commercial equipment finance continues to
grow. Though down on last month’s quarterly peak, July showed a
year-on-year growth of 18 per cent, the eighth consecutive month
of

year-on-year growth. Interestingly, July saw a large jump in
residual risk business (more than a quarter of all business
finance, at its highest proportion since December 2005), with a
corresponding dip in HP business. At the same time, the proportion
of direct (as opposed to sales) finance reached 73 per cent, higher
than any other point in the past two years. From the statistics, it
is not possible to establish how much of this is as a result of big
ticket transactions, which can be misleading when trying to
identify trends.

Comment

The outlook in the different asset sectors appears positive,
with a few exceptions. According to the Society of Motor
Manufacturers & Traders (SMMT), the medium to long-term outlook
for the big bus sector is “bleak”, while it is making much more
positive noises about van and truck registrations, a much larger
sector for asset finance providers. The Manufacturing Technologies
Association reports a 10 per cent growth in orders in H1. Despite
recent turbulence in the capital markets, positive forward-looking
statements from the CBI and “above normal” order books (underpinned
by the manufacturing sector) augur well for capital investment in
the immediate future. A slight weakening of the economy appears
likely in 2008, with GDP forecasts collated by HM Treasury showing
2.2 per cent growth in 2008, following 2.9 per cent growth

this year.

The author is a partner in the consulting and services firm
Invigors LLP, peter.hunt@invigors.com

atively stable, with greater variation in new car volumes. YTD
consumer motor finance volumes of £7.1bn have a split of 51 per
cent new, 49 per cent used cars. YTD business motor finance new
business volumes were £4.3bn. Following June’s 227 per cent
monthly growth, true to form, big ticket volumes dropped almost as
much in July to £168m. Meanwhile, commercial equipment
finance continues to grow. Though down on last month’s quarterly
peak, July showed a year-on-year growth of 18 per cent, the eighth
consecutive month of year-on-year growth. Interestingly,
July saw a large jump in residual risk business (more than a
quarter of all business finance, at its highest proportion since
December 2005), with a corresponding dip in HP business. At the
same time, the proportion of direct (as opposed to sales) finance
reached 73 per cent, higher than any other point in the past two
years. From the statistics, it is not possible to establish how
much of this is as a result of big ticket transactions, which can
be misleading when trying to identify trends. Comment
The outlook in the different asset sectors appears positive,
with a few exceptions. According to the Society of Motor
Manufacturers & Traders (SMMT), the medium to long-term outlook
for the big bus sector is “bleak”, while it is making much more
positive noises about van and truck registrations, a much larger
sector for asset finance providers. The Manufacturing Technologies
Association reports a 10 per cent growth in orders in H1. Despite
recent turbulence in the capital markets, positive forward-looking
statements from the CBI and “above normal” order books (underpinned
by the manufacturing sector) augur well for capital investment in
the immediate future. A slight weakening of the economy appears
likely in 2008, with GDP forecasts collated by HM Treasury showing
2.2 per cent growth in 2008, following 2.9 per cent growth
this year.