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If you want to buy a used vehicle, the first thing you need is money. And if you aren't paying in cash, your purchase options have just got a whole lot trickier Words: Chris Walton / Kevin Swallow Any operator looking to buy a used vehicle with asset finance should be working now to secure credit lines — no matter when they want to buy.
Last year it emerged that ING Lease UK was to cease offering new lines of finance from 30 November, leaving what some in the industry forecast as a £80m-a-month gap in asset finance. ING Lease was responsible for as much as 25% of the total asset finance market in the CV sector and other lenders have been working hard to make up the shortfall.
ING's final month of lending to UK CV buyers saw a spike in the market, according to the Financing and Leasing Association. In November 2012 some £390m of CV asset finance was lent; a three percentage point increase year-on-year.
It rounded out a strong 12-month period for the market, which rose nine percentage points year-on-year with £4.7bn worth of lending (see box for the state of the post-ING market).
It's all so quiet But all indications are that it has been quiet on the asset finance front. Mike Geddis, the commercial director at Asset Finance Solutions, tells CM: "The first month of the year has been quiet-ish. A lot of business was done in November, but business for us has been up slightly year-on-year.
"There are a number of firms that are saying they are open for business, but there are several customers waiting to see what will happen. Everyone is waiting for the dust to settle. At the moment there is no real panic in the market, but that could all change in March."
Remember to spread the risk Geddis is advising operators to spread the risk when it comes to securing credit lines. "[They] need to make sure they have their finance in place. ING was the biggest supplier to the broker market," he says.
"ING knew their brokers' customers' business and was comfortable with that business, as the broker had built up a history with that customer."
He explains that with that security blanket no longer in place, some brokers of asset finance who now find themselves working with new lenders, are being asked to reduce lending terms until customers can prove themselves again. Even through the dark days of the recession, asset finance has been readily available because it is secured against an asset with relatively steady depreciation. But Geddis warns that in the wake of ING's exit — a lender that was comfortable with the UK CV market — 'easy' money is not so 'easy' any more.
For operators that means that credit they assume might be readily available might not be in place after all. "That is the advice to the customer," he says. "Make sure you have the lines in place. Get it in place and do not leave it to the last minute. And spread it around if you have quite a large requirement."
Former rivals to ING were already making moves to step up their activities in the commercial vehicle asset finance market, before ING dropped its bombshell last year, explains Matthew Porton, the sales director at Genesis Capital Group.
Increasing numbers "Investec opened a new office in Reading in 2012; they held an open day at ING's offices to see if they can accommodate some of the team who were made redundant.
"They had board approval to increase their book by .000m from the 000m they already have. This means they can probably lend £350m per year, which is more than they currently do, but they don't have a vendor unit and these funds can be accessed only through brokers," he says.
Porton adds that Aldermore also visited ING to try and keep some staff who had experience with CV buyers in the industry and describes them as "anxious to fill the void" where they can. "As the UK's only private equityowned bank they do have access to funds for growth and are also implementing new systems to support this growth; this is a good sign that they are here to stay, but again their primary route to market is through the broker channel," he says.
There are many other funders that are growing Porton tells CM; Close Business Finance, he explains, brought together numerous divisions and appointed a new MD in 2011 to drive this expansion. Meanwhile, Arkle Finance has been gently growing since they changed their name from Weatherbys a few years ago; and new entrant Credit Asset Management has made more liquidity available to the market too.
The advice for operators is pretty clear: anyone wanting to make a quick purchase needs to plan ahead and secure credit lines early. • THE FINANCE & LEASING ASSOCIATION IN NUMBERS Figures published by the Finance & Leasing Association (FLA) show that asset finance deals for CVs went up 4% in 2012 to £4.6bn, compared with 2011. This supports the general anecdotal trend that more trucks, trailers and vans are being financed as hauliers, logistics companies and rental businesses continue to be risk averse during tough economic conditions.
Nigel Butler, the commercial director for Renault Trucks UK, believed outright ownership of a new truck, up to five-years-old, is as low as 5%. "We've also seen strong growth in our captive finance business, which now funds around 40% of all of our truck business," he explained, adding that there is little sign this is going to change.
Finance deals fell through the final quarter of 2012 by 4% to £1 .1 bn, compared with the third quarter, and December 2012 dropped a dramatic 25% to £336m when compared with December 2011.
Julian Rose, the FLA head of asset finance, said more firms, especially smaller ones, see asset finance as an affordable solution to their business equipment investment needs.
"But more can be done to further increase awareness," he explained. "We launched the Small Business Finance Directory website last year to help businesses find [local] asset finance brokers and lenders, and are currently discussing with the government ways for their proposed Business Bank to promote further take-up of this important source of finance for small firms."