Loans shake-up will hit the poorest car buyers

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Alan O’Sullivan writing in Today’s Mail on Sunday Financial section has a story about how the current “credit crunch” is likely to hit the poorest car buyers….

The biggest financier of “sub-prime” car loans has dramatically withdrawn funding from hundreds of independent dealerships to focus on its own outlets. It could mean that thousands of drivers looking for cheap finance on a second hand car will be disappointed. Welcome Car Finance, part of Cattles, which specialises in loans to those with a poor credit history, insisted the move did not reflect any lack of funding because of the credit crunch.The sub-prime lending sector in Britain has been mired in rumour after the well-publicised difficulties of London Scottish, the country’s second-biggest player in the field. In fact, Cattles has been linked to a possible takeover of all or part of London Scottish’s business. Cattles’ vehicle finance unit said it had experienced an influx of customers to its 12 dealerships from smaller lenders. This had led it to focus on this business as it is more profitable than providing finance to third-party dealers. Greg Stevens, managing director of parent company Welcome Finance, said: “Why would we help other dealers make money from selling cars and loans when we can make more doing it ourselves?” David Gregory, founder of the blogging site Car Credit Complaints, said: “Most of the sub-prime car market relies on Welcome, so many dealers – perhaps 60 to 70 per cent – will find this a devastating blow. Consumer choice will also suffer. Whereas those with a poor credit rating could previously turn to hundreds of dealers, they will now only be able to chose between the dozen Welcome dealerships.” The typical APR on a Welcome Car Finance loan is 19.9 per cent – roughly in line with borrowing on a credit card.