Dealer lending panels need to be fit for COVID-19 car market, says Startline

Dealers need to be considering their lending panels to ensure they are fit for the COVID-19 coronavirus era used car market, says Startline Motor Finance.

Changing lender appetites and the shifting needs of customers needs to be considered post-Coronavirus into 2021, to ensure dealers have a range of products and credit appetites to suit the profiles of customers, said Paul Burgess, CEO of Startline Motor Finance.

Startline said it has noticed that most prime lenders have tightened up their lender criteria, so more business is going to cascade down the motor finance market.

Many people are also likely to be hit financially by the coronavirus pandemic, and a lot of people who want to borrow, won’t meet the criteria of more lenders, said Startline.

Chief executive, Paul Burgess, said: “At a time when the used car market is booming, these factors seem less important but it is probably inevitable that both will start to have an impact, if not in the near future, then in the medium term.

“Dealers need to start thinking in these terms, looking at the kind of changes in the profile of their lending that they have seen since the start of lockdown, extrapolating them into the future and seeing if their lending panel is fit for purpose.”

Burgess said the situation was likely to accelerate a trend with a greater number of motor finance companies with differing risk appetites.

He said: “To some extent, the emergence of risk-based products is a reaction to this but the problem with those solutions is that they fail to create any expertise around different types of customer.”

The key to successfully meeting the needs of different groups of customers lay in having a genuine understanding of their needs, said Startline.

Burgess said: "Our whole flexible business model is based on being able to use a combination of technology and people skills to recognise applicants who remain good credit risks despite sometimes unconventional financial profiles. That takes a degree of expertise and not just the kind of menu-based approach that you’d see in a risk-based product.

“From experience, we know that this is very much the kind of approach that produces results for dealers and which is probably more relevant than ever in the coronavirus era.”