Used vehicle stock funding market set to double

The business loans the vehicle, not the money, and keeps the title to the car, so that finance is tied to an asset.

It targets a maximum loan term of 120 days for a return of capital, with repayments at regular intervals during the intervening weeks. On average, stock turn has been 60 days.

Liam Quegan, managing director, NextGear Capital, said: “The whole industry has added more than £1 billion in funding capacity for used vehicle stock that banks were reluctant fund.

“Funding is increasing over time and as dealers take more stock funding, they will take higher quality vehicles. Around 37% of our dealers have taken a facility increase. They are getting used to stocking funding and it is becoming normalised. We will become like the Canadian and US markets.”

Although the average value funded per vehicle is £6,000 in the UK, the value of vehicles funded by dealers with larger finance agreements is £11,700, he said. NextGear Capital will fund vehicles that are up to 10-years-old and 100,000 miles.

Quegan said that average stocking levels for independent dealers is around £100,000, but that the business is also providing funding to franchised dealers, where the value of loans can reach £300,000.

He added: “The used vehicle stock funding market can at least double in the next three to four years, as the market is still underserved. There is an opportunity for growth.”