Near-prime PCPs will probably be the motor finance sector’s major growth area this year.
Startline Motor Finance made the prediction, saying there was a rise of about a fifth for its version of the product towards the end of last year, with the trend continuing into January.
Chief executive Paul Burgess said: ‘One of the key developments we saw in 2020 was prime lenders tightening their underwriting rules in response to the pandemic and more potential car buyers being referred to near-prime lenders as a result.
‘So far, this has largely affected hire purchase, but it is now starting to become apparent in the PCP sector.
‘There has been a definite acceleration in our near-prime product in the last quarter and heading into 2021 as a result.
‘This is something we are especially seeing at major dealer groups where PCP is a more prominent product. For them, it’s clear that near-prime PCP is becoming more important.’
The trend was also being powered in part by better online handling of motor finance by dealers and other introducers, he added.
‘The repeated lockdowns of the last year mean that everyone has had to get better at their digital customer journey.
‘One aspect is that car buyers are increasingly being presented more effectively with a choice of finance products and providers online.
‘Within this development, consumers are able to see more clearly the advantages of PCP and the competitiveness of near-prime versions of the product, so there have simply been more online applications.’
He said Startline’s near-prime PCP was one of only of a handful available in this market niche.
‘We’ve always been surprised that there is not more competition in this sector.
‘It is not necessarily a product that is easy to get right – and it took us a little time to finalise our version – but it has an obvious and potentially important place in the market.
‘Our view is that with the general trends that are likely to continue through 2021, it is something that is likely to make sense for an increasing number of introducers and car buyers.
‘Certainly, we expect to see further growth over the next quarter.’