Europe Report: Car Sales Scam Hits Lessors

A substantial motor fraud in South Wales has left more than 30 finance companies facing losses, while consumers face repossession of new cars which they thought they had purchased outright for cash.

At the centre of the deals is a company called Gwent Fleet Management Ltd. (GFM). Currently being wound up insolvent, GFM had traded as an independent car dealership.

Over a period of time, a number of fraudulent deals were placed through GFM, which effectively acted as a resale broker. It purchased new cars from various other dealers who held franchises with the manufacturers, to the orders of customers who were offered attractive prices.

It is possible that the finance companies’ losses could rise as high as £5m ($8 million) or more, allowing for the other cases where customers had sought finance and GFM retained sums due to be passed to the franchised dealers.

A police investigation is now focused on GFM’s Managing Director Brian John Webb.

FINANCIER OFFERS ‘TIME OUT’ LOANS
Carlyle Finance has introduced a new tool to help its dealer partners sell motor finance alongside cars: the “Time Out” loan.

Designed to give customers a month off making payments every year, Carlyle said it expected the Time Out initiative to help dealers during what is a difficult time for motor retailers. Under the terms of Time Out, an agreement which would originally have run for 24 months will instead run for 26 (i.e. 24 + 2), and a 36-month agreement for 39 (36 + 3). The customer therefore pays the same amount, but over a longer period.

MANUFACTURERS OPT FOR DEALTRAK123
Frontline Solutions has launched DealTrak123, a point-of-sale system that allows commercial vehicle and private car dealers to stream a finance proposal to the most appropriate lessor without the need to multi-proposing deals. The system, which includes a deal optimiser together with full reporting functions and lead-generation options, has already been adopted by some five automotive manufactures for use in their franchise dealer groups. It also is generating much interest amongst brokers — some 26 of whom are already signed up.

MG APPOINTS DEALER FINANCE PARTNER
GE Capital Solutions, Commercial Distribution Finance has been chosen by Nanjing Automotive Corp. (NAC MG) to provide dealer stock finance options for the return of the MG brand. The famous marque’s return to the U.K. will be supported by around 50 dealerships across the U.K. Over half the credit lines offered to dealers have been taken up, GE Capital said, allowing dealers to fund their wholesale stock — whether new or demonstrator.

MERGER TO CREATE MOTOR FINANCE GIANT
Fundamental changes in the fleet and motor finance market are on the horizon, following last month’s dramatic news that two of the U.K.’s largest banks are to combine their operations. The proposed merger of Lloyds TSB and HBOS — if it goes ahead — will create a dominant player in both the point-of-sale (PoS) motor finance and the corporate fleet leasing sectors. HBOS-owned Lex and Lloyds TSB Autolease, meanwhile, will, if merged, have a fleet of around 380,000 units — three times as large as that of the next-biggest operator.

BROKERS POSE AS FLEET MANAGERS FOR ACCESS TO PRICING DISCOUNTS
Phoney contract hire ‘fleets’ are causing grief for franchised dealers by undercutting their prices. Some brokers are posing as contract hire companies in order to benefit from manufacturers’ volume discounts — but then “ignore the trust agreement” and simply retail the cars, with “minimal” chances of being caught, said Colin Bruder, managing director of the Network Automotive consultancy.

FUNDERS EXIT STAGE LEFT (AND RIGHT)
Les Spencer, director of brokerage Mann Island Finance, estimates that during 2008, the non-prime market “lost about 80% of its funding capacity.” He adds: “There is an inability in today’s market to satisfy the needs of dealers and finance brokers actively trading in this area.”

The roll-call of those who have ceased subprime lending as the credit crisis has deepened. Welcome Finance stopped providing hire purchase through intermediaries in April, while in the same month Blue Motor Finance ceased lending from its own book and reverted to pure brokerage activities; Black Horse’s non-prime Deal Assist programme was stopped in June; BCT cut ties with a number of “underperforming” brokers in June; Park Finance closed to new business at the end of August.

With funders tightening underwriting standards across the board — with prime lenders moving to ‘super-prime’, subprime moving to near-prime, and so on — there is more demand for subprime lending than there is appetite among lenders to fulfil that demand.

—Courtesy Motor Finance magazine