Tuesday 11 December 2018

Loans to motorists rise to €1bn despite fall in new car sales

(Stock photo)
(Stock photo)
Eddie Cunningham

Eddie Cunningham

Banks owned by car companies loaned almost €1bn to Irish motorists last year. The 'big three' - BMW, Renault and Volkswagen banks - recorded increases of between 1.5pc and 7pc, according to figures obtained by the Irish Independent.

The increase in total lending volumes (to almost €950m) came despite the fact there was a 10.4pc fall in new car sales last year.

The rise appears to reflect industry sentiment that people are increasingly financing their cars through such lending institutions - as well as opting for higher-spec, more expensive models.

There also appears to have been an increase in the number of people taking out personal contract plans (PCPs).

The latest figures show Volkswagen Bank loaned €500m in 2017 - an increase of 7pc on 2016.

That pushes its total auto-finance lending, since it started here in 2008, to €2.3bn.

Its PCP mix for last year was 55pc.

BMW Financial Services loaned €231.7m through its group-brand retailer network and its several multi-make Alphera outlets.

The sum represents just a 1.5pc increase on the previous year, but that has to be taken as a positive considering the total new car market was back by such a significant amount year-on-year.

Of the €231.7m loaned, around €78.5m was for PCPs - or 34pc of the overall amount of credit.

The 2017 figure brings BMW's total lending since January 2011 to €1.32bn.

Renault/Dacia Bank loaned €205m in 2017, a 2.5pc rise - again despite the sizeable new car market decline.

Three-in-five (60pc) of its customers took out a PCP.

It says there was a 57pc increase in returning customers, particularly those with PCPs, who opted for another new car at the end of their agreement.

The Renault/Dacia Bank has funded an estimated €835m worth of transactions since its inception in Ireland.

In total, the 'big three' have loaned out almost €4.5bn since they individually set up here.

But, with the arrival of Toyota's financial services arm, they won't have the "manufacturer-backed" finance market to themselves from now on.

Tomorrow, Toyota Financial Services (Ireland) will be officially rolled out at a ceremony in the company's Dublin headquarters.

It is expected that several new jobs will be created.

TFS(I) is a joint venture between Toyota Financial Services, Toyota Motor Corporation's international finance arm, and Toyota Ireland, the 100pc Irish-owned distributor of the brand here.

It arrives at a challenging time, with experts forecasting a further 10pc fall in new car sales this year.

However, Toyota has had a good start to 2017 and topped the Society of Irish Motor Industry registrations for January.

It has benefited substantially from a marked swing to hybrid buying (up 75pc overall on January 2017).

Of the 4,393 models Toyota sold, 48pc were hybrid.

Meanwhile, PCPs continue to generate huge interest in the market place. According to Brian Merrigan, managing director of BMW Financial Services (Ireland) DAC, they have been "badly misunderstood and misquoted" over the past year.

"PCP is not for everybody," he said.

"It needs to be properly qualified as the right product up front, and sold accordingly."

He also said it is important for people to know that there are only a handful of "manufacturer-backed" finance companies that stand over the guaranteed minimum future value of the car.

This removes any doubt about the customers' protection should the value of cars drop, he claims.

Irish Independent

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