Remember the time, not that long ago, when high street banks and building societies were falling over themselves to lend money?

Competition was so fierce that franchised motor dealers often struggled to sell their own loan packages for new cars, writes Chris Phillips.

Well, all that seems to have changed, with the ill wind of the credit crunch blowing in some good for showroom finance and insurance.

As Paul Harrison, head of motor finance at the Finance and Leasing Association, put it: “Far from having to be persuaded about the attractions of dealer F&I offerings, customers are actually asking for them because of the change in economic circumstances.”

Latest FLA figures show that 61.5% of consumers buying a new car in the year to November used motor finance provided through dealers, almost ten percentage points up from November 2010.

David Johnson, group finance and insurance manager with Perrys Motor Group, described the current F&I market as being “on the crest of a wave, with manufacturers devoting a lot of energy and resource to move the metal”.

He pointed to the range of incentives offered by car-makers, ranging from interest-free loans to permutations of personal contract purchase.

Vauxhall’s year-end sales, highlighting a record 9.19% retail market share in November following the introduction of 0% finance earlier in the year, is underscored by Johnson, who said: “For Perrys, the 0% offer brought in good sales, particularly in September and October, and is still a strong attraction.”

Peter Stewart, director of business development for Vertu Motors, which represents 16 brands, said the “aggressive showing” of manufacturer-sourced finance was partly to compensate for the increase in new car prices caused by currency exchange rate movements.

“We’re capturing 75% to 80% (of point of sale), compared with 60% a year or two ago and maintaining that level. Underwriting business from independent lenders is also getting back to levels before the credit crunch – around 84% of business is now accepted on new and used vehicles.

“PCP is seeing a massive up-take as consumers realise that cars are no longer an asset, but a running expense. And with typical PCPs offering repayments at 4% to 8%, that’s cheap money in today’s marketplace.”

Paul Harrison said that according to figures from FLA members, PCPs now accounted for 58% of deals, followed by hire purchase, lease and personal loans.

F&I sourced through manufacturers was most common, but only just – 55%. On the insurance side, he reported “good feedback” from dealers on the increasing take-up of options ranging from GAP to tyre and paint protection.

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