Mixed messages have swirled around the auto finance sector in the last month. The Government announced the continuation of its plug-in grant scheme for electric vans, while adding substantial costs to electric car ownership. New car sales fell in February, yet new funding players entered the market. And the Financial Conduct Authority (FCA) intends to introduce an industry-wide redress scheme for motor finance customers, while the Financial Ombudsman Service (FOS) will start charging professional representatives higher fees to refer a case.
With the Supreme Court due to start hearing the commission disclosure case on the inauspicious date of April 1st, industry eyes are focused on potential outcomes.
As one of the lenders named in the case, Close Brothers has made a £165 million provision for potential compensation payments, in addition to a hit of around £200 million in direct and indirect costs related to motor finance commissions for this financial year.
If the Supreme Court rules that motor finance customers have lost out, the FCA will move straight to considering a redress scheme. This would make lenders responsible for determining whether customers have lost out, and where this has occurred offer “appropriate compensation.”
The aim is to reduce customer reliance on claims management companies, yet Barings Law has won a landmark High Court ruling that paves the way for multiple claimants to make a single ‘omnibus’ claim with a lender, rather than having to file separate claims for each individual.
This should speed up court processes, and comes as the FOS revealed it had received a record number of complaints about car loans in the final three months of last year. The majority of these originated from claims management companies, which will have to start paying £250 to refer each individual case from April 1st.
Meanwhile, the new car market fell for the fifth consecutive month in February, although battery electric vehicle (BEV) registrations achieved an impressive 25.3% market share.
The SMMT, which represents OEMs, has called on the Government to boost EV volumes through demand-led initiatives, rather than regulation, suggesting a 50% reduction in VAT on new EVs.
The Treasury has announced £120 million support for the electric van and taxi markets, and its Planning & Infrastructure Bill is designed to expedite the installation of EV charging points.
But from April, electric cars will have to pay £195 from their second tax payment (up from £0), with an additional £425 expensive car supplement for any cars that cost more than £40,000 when new (i.e. the majority of EVs). This will add £620 annual cost to EVs, inflating lease rentals by £50 per month.
Nonetheless, leasing’s ability to help fleets and drivers amortise the higher cost of electric vehicles continues to attract new players, with dealer group Citygate Holdings launching Citygate Leasing with a panel of funding partners, and Arval providing a white label solution for Chinese EV manufacturer BYD, called BYD Lease.
Plus, Europcar Mobility Group is offering business customers price parity to hire an EV or internal combustion engine vehicle, as part of its initiative to boost sustainable mobility.
Sustainability disclosure will become a mandated requirement for companies next year, so fleet leasing company Alphabet has introduced its Carbon Manager tool, which tracks real-world emissions and provides the data to record and support net zero commitments.
