RateSetter plans ‘cautious growth’ in car finance market
RATESETTER is planning to grow its motor finance division to take advantage of the huge opportunities it sees in the market.
The peer-to-peer lender entered the consumer hire purchase industry in May when it acquired Vehicle Credit Limited out of its parent company’s administration as part of its wholesale lending “interventions”. Vehicle Credit Limited has now been integrated into the group as part of RateSetter Motor Finance.
RateSetter said it bought the business knowing there were good opportunities in car finance. The division is tiny in comparison with other players in the industry, but RateSetter suggested this will enable it to be nimble, grow quickly and be selective over customers.
Peter Behrens (pictured), RateSetter’s chief operating officer, said: “The scale of the UK motor finance market is huge and presents good opportunities for RateSetter – we are strong at consumer credit and have an opportunity to prudently build on our existing consumer hire purchase business.”
Bank of England economists have warned the car finance market is becoming increasingly vulnerable to economic shocks because lenders are offering cheap deals to ensure sales remain at record levels. Provident Financial’s car finance division Moneybarn is currently being investigated by the Financial Conduct Authority over the way it assesses customer affordability.
Behrens said RateSetter is coming into the market at “an interesting time” and is looking to grow its car finance division “cautiously”. He claimed the group’s experience in both consumer and motor lending puts it in a strong position “to manage both the risks and sustainable growth”.
Fellow P2P lending platform Zopa said earlier this year that it sees potential in the secured auto finance sector because there are healthy levels of demand but a generally poor customer experience.
Expanding in the sector could help Zopa correct an imbalance between lenders and borrowers, which resulted in a freeze on new money transfers at the end of 2016 and more recently. One in every 370 cars in the UK was bought with a Zopa car loan in 2016, according to the platform’s website.