mills sheldon 400

Total asset finance new business hit £2.4 billion in November 2020, down 10% compared with the same month in 2019, according to figures released by the Finance & Leasing Association (FLA).

The commercial vehicle finance and car finance sectors faired the best in November, with the former achieving £705 million of new business and the latter hitting £699 million. This represents a 1% and 5% fall respectively when compared to the previous year’s figures.

In comparison, IT equipment finance new business hit £154 million in the month, equaling a 32% decline from November 2019.

Geraldine Kilkelly, head of research and chief economist at the FLA, said: “In November, the asset finance market recorded its smallest rate of contraction in new business since the start of the pandemic. UK-wide lockdowns during the first quarter of 2021 mean the near-term outlook remains challenging.”

 Nov 2020% change on prev. year12 months to Nov 2020% change on prev. year
Total FLA asset finance (£m)  2,396 -10 27,542 -23
By Asset:
Plant and machinery finance (£m)  459 -14 5,875 -21
Commercial vehicle finance (£m)  705  -1 7,020 -24
IT equipment finance (£m) 154 -32 2,569 -8
Business equipment finance (£m)  159 -8 1,821 -21
Car finance (£m)  699 -5 7,310 -27

The figures above also show that in the 12 months leading up to November total asset finance new business amounted to £27.5 billion, 23% lower than the same period in 2019.

The effects of this dramatic decrease can be seen in a recent study published by the Financial Conduct Authority (FCA). The study revealed that 4,000 financial services firms across the UK are facing a serious risk of collapse as a result of the pandemic.

Out of these 4,000 companies, the FCA found that around 30% could cause harm to consumers if they were to collapse. Furthermore, some 8,000 out of the 19,000 total respondents warned that the crisis was having an adverse impact on their business models.

Higher chance of collapse

According to the FLA, the asset finance industry has provided almost £20 billion new finance to businesses since the onset of the pandemic which has funded more than 38% of UK investment in machinery, equipment, and software in Q3 2020.

Despite this, more than 10,000 financial services firms in the FCA’s study had either suffered a fall in net income or were bracing themselves for a decline. For example:

  • Some 7,235 firms were expecting a fall in net income of 25% or less within three months of the poll, but 1,890 companies warned that the drop could be between 26-50%;
  • More than 550 firms were anticipating a net income decline of 51-75% and a further 337 were preparing for a drop of more than 76%.

Sheldon Mills (pictured above), executive director of consumers and competition at the FCA, said: “Most of the companies that faced a higher chance of collapse were small or medium-sized businesses. At the end of October, we have identified there were 4,000 financial services firms with low financial resilience and at heightened risk of failure, though many will be able to bolster their resilience as and when economic conditions improve.”

Consumer car finance new business volumes fell by 24% in November 2020

Alongside these figures, the FLA also revealed that the value of advances for both new and used cars bought on finance by consumers through the point of sale stood at £2.2 billion in November, marking a 21% decrease on the previous year. This fall in new business volumes reflects the closure of many showrooms across the UK as further restrictions were introduced to combat the rising cases of COVID-19.

Breaking this down into new and used cars, the consumer new car finance market reported a fall in new business volumes of 27% in November 2020 compared with the same month in 2019. In the eleven months to November 2020, new business volumes in this market fell by 25% compared with the same period a year earlier.

In comparison, the consumer used car finance market reported a fall in new business volumes of 23% in November 2020 compared with the same month in 2019. In the eleven months to November 2020, new business volumes in this market fell by 17% compared with the same period a year earlier.

Cars bought on finance by consumers through the point of sale

New businessNov 2020% change on prev. year12 months to Nov 2020% change on prev. year
New cars
Value of advances (£m)  1,058 -24 15,789 -19
Number of cars  46,013 -27 713,910 -23
Used cars
Value of advances (£m)  1,143 -18 16,263 -12
Number of cars  86,100 -23 1,254,621 -16
Total cars
Value of advances (£m)  2,201 -21 32,052  -15
Number of cars  132,113 -24 1,968,531  -19

Looking at cars bought on finance by businesses, the FLA’s figures revealed that 26,995 new vehicles were finance in November 2020, marking a 7% decrease on the previous year. However, 4,296 used vehicles were bought on finance by businesses in the month, marking a 22% increase on the same month in 2019.

Cars bought on finance by businesses

New businessNov 2020% change on prev. year12 months to Nov 2020% change on prev. year
New cars 
Number of cars  26,955  -7 272,852  -37
Used cars
Number of cars  4,296  -22 58,369  6

 

 

 

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