Almost 20% of all used car customers can be described as near prime according to research by Startline Motor Finance – underlining the need for dealers to meet their specific needs.
The result comes from analysis of applications rejected by conventional prime lenders but which would be written by Startline under its flexible lending model.
CEO Paul Burgess said that the findings meant that dealers could potentially be passing one in five customers straight from prime to sub-prime lenders if they had no flexible prime option.
He explained: “For dealers whose panel does not include a spread of risk appetites among lenders, the drop from prime to sub-prime is vertiginous with the APR rate rising by perhaps as much as double figures.
“Our approach instead is to take a closer look at the circumstances of the person making the finance application, often entering into a dialogue with them and the dealer. The thinking is that if we can gain an understanding of that person’s overall financial position, then we can potentially work to arrive at an affordable solution that meets their needs.”
Paul said that one of the key issues surrounding lending decisions today was changing home ownership and employment patterns.
“There are all kinds of ways in which the factors traditionally used to credit score people no longer apply to many who are actually solid applicants. These include the decline in home ownership, the rise in contract and temporary working, and a host of other general changes to overall economic circumstances.
“All of these would place them outside of the scope of a prime lender but, in many dealerships, the only other solution is a sub prime. Instead, Startline’s flexible prime lending provides a further option.”
During the last year, there had been a 25% increase in dealer groups adding Startline to their panels. Paul said that this underlined the increasing demand in the market for this kind of lending.
“Our growth indicates a realisation among dealers that this large group of near prime motor finance customers requires, and deserves, a more specific approach.”
Startline’s development of its flexible prime product range is being continued with the launch of a new product. Finishline is targeted at used car buyers who narrowly fail to meet the company’s current lending criteria but are still considered to be good quality applicants.
Paul explained: “With Finishline, we are extending our concept. It will typically cost a couple of per cent APR above the main Startline product range but will be much, much more fairly priced than a sub-prime lender, which is where these customers may otherwise be placed.
“Our view is that these people represent a slightly higher risk but are still very reasonable lending prospects. They should be part of the motor finance mainstream.”
Paul said: “What we do at Startline is try to look at the applicant as an individual. Of course, we have some hard lending rules but in areas where other lenders take a black-and-white approach, we will take a look at the applicant in more detail. Finishline is a continuation of this approach.”
New business push into top 200 franchise groups for Startline
A new business push in the top 200 franchise dealer groups is designed to continue building momentum at Startline Motor Finance
Paul Burgess, CEO at Startline, said: “The design of our flexible prime motor finance and the way that it fits into a dealer’s lender panel means that it is really designed for larger franchise groups and car supermarkets.
“This means that the list of our prospective customers is well defined. We enjoy quite impressive market penetration for a relatively new company but we want to ensure that we continue to build on the success that we have seen so far.
“To that end, we are having a concerted push into the top 200 groups across the UK. We find that if we can get in front of decision makers, they immediately see the value of our proposition. The trick is to get that seat and we tend to do it in a very direct way – by approaching the senior management on a director-to-director basis.”
Headquartered in Glasgow, Startline Motor Finance was established in 2013 by a highly experienced motor finance team and has a sales presence throughout the whole of the UK. More details at startlinemotorfinance.com.