A UK-BASED MOTOR finance company, Close Motor Finance, is entering the Irish car finance market this week in an attempt to fill the gap it perceives to have been left after the withdrawal by some lenders and the tighter restrictions imposed by the remaining Irish finance houses.
It will offer loans with average interest rates of between 8.75 per cent and 9.75 per cent, though the terms will depend on individual circumstances.
Permanent TSB announced last week that it is to shed about a fifth of its staff in response to a shrinking bank market and narrower interest margins on loans.
The bank remains the leading lender, responsible for financing stock for brands such as Hyundai and Opel. According to several of the lender’s affiliated retailers, it is becoming increasingly difficult to get finance for new customers.
"You will only get the cream of the crop passed for finance these days, everything has to be watertight," one north-east motor dealer told The Irish Times.The bank's website states that for five years' finance, a 20 per cent deposit/trade-in is required.
The limitations in lending from the two main banks, Bank of Ireland and Allied Irish Bank, as well as the departure of GE and Bank of Scotland Ireland, means that it has been left to the likes of Permanent TSB and local credit unions to provide the majority of car finance in a market that has recorded an increase of 28.7 per cent on the same month in 2010.
VW Bank started lending directly to customers at the start of 2010 and BMW’s finance arm began trading recently. BMW has also introduced a subsidiary arm, Alphera Finance, as a finance partner to non-BMW outlets.
Close Motor Finance, which provide finance for 5,000 car dealers across the UK, will trade in Ireland as First Auto Finance.
The managing director of its Irish operation is Frank Donnellan, previously a director of Woodchester and more recently managing director of Bank of Scotland Ireland’s auto finance arm.
In 2009, as the motor sector pushed for the introduction of a scrappage scheme, a report on the sector by Dr Peter Bacon stated: “The banks curtailed funding to the industry in late 2008, resulting in the industry not having sufficient funds to enable normal trading, and the consequent inability to accept trade-ins in early 2009.”
One large dealer group recently claimed 66 per cent of all sales in 2007 were financed by loans organised through the dealership with its favoured lending institution. By last year that had fallen to 44 per cent and from January to October of this year that had fallen to just 26 per cent of all its car sales. A spokeswoman at the time said: “that means the majority of its clients must find their own finance. These figures also need to be judged in the context of a dramatic drop in new car sales between 2007 and this year as well. It’s a reduced percentage of a much reduced total.”