At Pike + Bambridge, we offer independent, expert advice to guide you through the complex, and often confusing process of purchasing or leasing your new car.
One thing that has materially changed in 2020 is the process of obtaining credit for car leases and car finance in general.
Beware of online leasing websites offering incredibly cheap pricing on cars. Firstly, they may be little more than a marketing ploy to encourage you to contact them, by which time the deal has mysteriously ‘sold out’, and secondly, they’ll rarely have the expertise to support you through the finance underwriting process, which can be both time consuming and complicated depending on your circumstances.
Here’s our guide to what you can expect, and why having an expert on your side is more important than ever.
Personal Finance Underwriting – What Has Changed?
All lenders are concerned about the prospect of lending on cars to clients whose job security is difficult to determine. This has meant that all clients (even those with no risk of job loss) are being put through ‘COVID impact’ rules.
Don’t be surprised if your car finance application now needs some or all of the following:
- Payslips showing pre and post-COVID net wage levels
- 3 months personal bank statements
- Explanations of any discrepancies on credit reports around addresses, electoral roll etc.
The key thing here is to prepare for the finance underwriting process to take longer than you may have experienced previously. This is in part down to Financial Conduct Authority rules tightening since you may have last applied for car credit, and partly down to the world we now live in in late 2020.
Businesses Finance Underwriting – What To Expect
We do have sympathy for underwriters looking to support businesses with credit lines for vehicles in 2020. How on earth do you judge a business’ viability in the world of lockdowns, furlough, grants, CBILS and the rest?
The truth is the same way you have always done, by looking at the fundamentals underwriters have always judged their decisions on. Here is a brief guide to this:
- Age of business – if you are under 2 years of trading, let your car finance supplier know early on. This will make a big difference to the funding that is available.
- Net worth – as business owners, you may focus more on cash, or on the profit and loss account, but funders are focused on net worth as a base line criteria. Low or negative net worth will always need explaining and may create barriers to obtaining the best car finance rates.
- Activity in the business – we have seen an explosion of applications for business finance due to tax benefits on electric cars, which is great news for business owners. If you haven’t looked at the tax savings you could achieve, do so!
What is less positive is that just as this new method of funding your business cars has arrived, the underwriting criteria from banks and leasing companies have tightened.
If your limited company is showing limited activity, it may be more difficult to obtain credit, particularly without a director’s guarantee which only select funders may allow.
- Private-equity backed, loss making businesses?
If your business is budgeted to lose money, and is in the ‘scale-up’ stage of growth, it is imperative you consult experts to support you on your car finance funding options.
As always, our P+B team of experts is here to support and guide clients through the process. That is what separates us from the call-centres and online marketing sites we sometimes find ourselves competing with.