Highlights
October new business volumes of FLA
members were expectedly down on the previous month’s quarter end,
though thanks to the first year-on-year growth in car finance in 13
months, the business finance market (excluding big ticket) was down
only 5 percent on the month and 22 percent on October last year.
Less positively, with new business volumes of only £75 million (€83
million) the big ticket market has continued its downward slide,
hitting its lowest point for many years and 89 percent down on the
same period last year.
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For the second month in a row,
consumer finance volumes were less than 10 percent below the
corresponding month in 2008, suggesting some form of bottoming out
may be occurring. Consumer car finance seems to be leading this
market movement, and is up 20 percent on the previous year.
With both business and consumer car
finance showing growth, motor finance is overall 12 percent up on
last year monthly total, though still 15 percent down on a YTD
basis.
Business finance on cars was up 0.7
percent on 2008. This seems broadly in line with registrations,
with the fleet market (more than 25 vehicles) down 2 percent, but
the business car market (fleets of less than 25 vehicles) up 12
percent. The car scrappage scheme was responsible for 20 percent of
all registrations in October, and the SMMT claimed that other
purchases were brought forward to avoid the VAT increase in
January. Economists have suggested the scrappage scheme has simply
brought forward purchase behaviour. If this is the case, with the
scrappage scheme due to cease and the increase in VAT,
registrations and connected funding volumes in the first quarter of
2010 could easily slip back.
While the performance of business
car finance has seemed promising, the position for other business
asset classes is less positive. As the chart below shows, the three
month rolling average for plant & machinery remains stubbornly
more than 40 percent down on last year, with business equipment and
commercial vehicles fairing little better.
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By GlobalDataThe latest CBI Industrial Trends
survey highlights manufacturer order book weaknesses and an
expectation of lowering output, suggesting plant & machinery
funding volumes are unlikely to grow in the near term.
One possibly hopeful piece of news
for commercial vehicle funders is the SMMT reporting in October
that van registrations appear to be stabilising (down 19 percent on
previous year), though truck registrations were down 63 percent.
The SMMT also report that the outlook for bus and coach
registrations is weak, having lagged other asset classes going into
the downturn. While not good news in terms of funding volumes, it
may create strong extension rental incomes in the sector.
Perhaps in line with the low
big-ticket volumes, aircraft, ships and rolling stock reported its
lowest total (£46 million) since September 2007 and after last
month’s low for international assets, October’s total was £1
million lower, at £56 million.
Among continued reports of
difficulties in the sector, broker-introduced business represented
only 13 percent market volumes in October, its lowest figure this
year. Proportionately, direct finance had a strong month, with 67
percent of the market.
Comment
Office of National Statistics data
showed third-quarter business investment 22 percent down on last
year. Little to cheer about perhaps, but the corresponding
quarterly graph shows a slowing of the downward curve and perhaps a
bottoming out of demand weakness. If this is the case, funding
volumes can hopefully start to grow, though it may take a few
quarters before this comes through without the sort of government
incentivisation that has helped car finance volumes over recent
months.
The author is a partner at the
consulting and services firm Invigors, and can be contacted at
peter.hunt@invigors.com
