Motor Trade Grapples with Uncertainty Amid Finance Crisis Following Close Brothers' Withdrawal
Last Friday’s unexpected decision by Close Brothers to halt new finance lending has left the motor trade in a state of uncertainty, with further disruptions expected as other lenders are likely to follow suit. This development, stemming from a recent Court of Appeal ruling, has prompted financial institutions like Lloyds (owner of Black Horse) to consider similar actions, creating additional challenges for car dealers ahead of a pivotal industry Budget this week.
Jamie Caple, head of independent dealership Car Quay, expressed concern over the potential consequences for dealerships if financing options remain limited, describing the impact as “massive” for businesses like his. Caple noted, “We were shocked to hear of Close Brothers’ abrupt withdrawal and to see other major lenders following suit.” Though he expects the disruption to be temporary, he warned that the increasing regulation could harm customer relations and sales, adding that these new policies seem like “over-regulation and meddling where it isn’t required.”
The recent court decision aligns with increased regulatory scrutiny from the Financial Conduct Authority (FCA) concerning commission disclosures in the motor finance industry. Steve Young, Managing Director at ICDP, emphasized that this issue could have global implications, suggesting that finance and insurance (F&I) income could face heightened compliance pressures beyond the UK. He advised dealers to prepare for potentially reduced F&I revenue and to consider adjustments in their business models to account for this shift.
Meanwhile, industry experts like Ian McMahon from UHY Hacker Young and IMDA chairman Umesh Samani have highlighted the broader impacts on dealer-customer relationships. McMahon pointed out the potential for slower stock turnover, as well as the strain on customer interactions, if dealers are unable to fulfill pending finance applications. Samani acknowledged the trade’s resilience but noted that this situation could lead to increased paperwork and delays, affecting both dealers and customers.
In a turbulent regulatory environment, dealers are bracing for challenges, with many hopeful that adaptability and strategic adjustments will allow them to navigate these changes while maintaining strong customer relationships and steady sales.
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