What's next for truck finance?
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Used truck dealers and operators alike were hit by a bombshell at the end of 2012, when INC Lease pulled out of the UK transport sector. It left many funding providers scrambling to fill the £80m-a-month gap Words: Christopher Walton and Kevin Swallow Two months ago the largest provider of asset finance to the UK transport and logistics market — ING Lease UK — pulled out of the UK market, creating an estimated £80m-a-month gap.
The Surrey-based arm of the Dutch bank closed its doors at the end of November 2012, leaving operators searching for new providers should they wish to use asset finance as a means to obtain vehicles, trailers, or any other equipment.
ING Lease UK's domination of the market — it was putting more than twice the amount of money into the market than its competitors through its broker partners — meant brokers were left looking for new finance providers for haulage customers in the short term.
Among those brokers are used truck dealers who strike deals with small independent finance houses. Dealers have voiced little concern publicly, but behind the scenes there has been a scramble to make sure alternative funds are in place.
In the main, the asset management sector is confident the industry will recover from the 'bitter blow'. But the gap it left wasn't small — it's been forecasted at £80m a month, and ING Lease UK was said to be responsible for as much as 25% of the total asset finance market in the CV sector.
Asset management is always seen as a market to enter when the times are good for third-party funders awash with cash, but when things turn sour it is always the first sector to see redundancies and departures.
James Davis, the head of CVs at Manheim, says the lack of finance — both here and abroad — could make 2013 a difficult year for the used CV market. "Evidence from the auction floor confirms the suspicion many industry watchers have had for weeks now: a lack of affordable finance is stopping buyers from purchasing used trucks from the retailer," he explains.
"This stall in demand — driven by poor business confidence, along with lack of finance, bank overdraft or available capital — is subduing auction activity. Our regular analysis of the CV market earlier in the summer highlighted that demand was outstripping the supply of used trucks; now we see the market return to more normal conditions, with volumes appearing to match demand," he adds.
Nigel Butler, commercial director at Renault Trucks UK, says the company rarely saw ING Lease UK as a competitor, as it often provided funding through brokers, rather than direct. "It's therefore difficult to fully understand just what impact its departure will have on our customers.
"It is always disappointing to see a funder choosing to leave the market, as competition is clearly good for us and our customers.
"Our customers are increasingly coming to us to provide the full solution with finance, and often maintenance or extended guarantees. With RTFS [Renault Trucks Financial Services] being captive, we will not be leaving the market as a result of a few difficult years," he says.
Peter Collins, the CEO of MAN Financial Services, says his initial reaction was one of disappointment, as "there are too few funders with an appetite for credit risk in the transport sector".
"ING remained a constant throughout the banking crisis, and was one of the few banks that remained active for finance broker introducers. It will be a bitter blow for this sector and its customers," he adds.
Collins, however, offers caution over the prospect of the market's ability to perform in coming months: "I do not believe its withdrawal will detrimentally affect MAN's ability to sell new and used trucks or buses into the market, as MAN Financial Services continues to support MAN customers." • Christopher Walton, Road Transport Media group news editor, believes the market will recover — but it might be rather painful in the short term...
"Make no mistake: the loss of ING Lease last year was a massive blow to the independent, used truck market. At least in the short term. The latest figures from the Finance and Leasing Association [FLA] show that asset finance lending for CV purchases has been growing. In October the market grew 12% year-on-year with £421m of finance being put through the industry. The problem is that the FLA has not published figures for anything after November, and that's when ING left the market.
"It is hard to estimate what share ING had of the CV market specifically. Estimates showed it took 4.5% of all asset finance lending in the UK, and it was understood that ING had a quarter share of all asset finance resold through brokers and dealers. In total, ING Asset was putting £1 bn of £22bn worth of asset finance into the UK economy.
"Since its departure, many firms have made commitments to expanding their asset finance lines — the likes of Invested, Aldermore and Close Business Finance are trying to fill the shortfall, but a £1 bn hole is never going to be easy to fill.
"The CV market will change to adapt to ING's departure, but the next three months will be the real test to see how confident lenders are with used vehicle buyers."
The best advice comes from Matthew Porton, sales director at Genesis Capital Group, who said at the time: "Now more than ever a sensible user or dealer in CVs will build a partnership with a knowledgeable, established brokerage that can provide them with access to far more funding than they will ever be able to secure themselves."