The Financial Conduct Authority has called for an extension for car finance holidays as many Britons continue to struggle with payments during the coronavirus pandemic.
The financial regulator took the decision in April to freeze car finance payments for three months for those who were struggling to cover their installments.
Its latest proposal is for customers who have already taken up the option of a car finance holiday to be offered a further payment deferral or payment reduction for another three months.
Meanwhile, those who haven’t yet requested to freeze payments, will get an extension on the time to apply for one until 31 October 2020.
Car finance extension: Customers who have already taken up the option of a car finance holiday to be offered a further payment deferral or payment reduction for another 3 months
The FCA announced the plans today, alongside new measures to support buy-now-pay-later agreements and other credit products for those facing financial hardship due to the virus.
A consultation on the proposals is open until 5pm on Monday 6 July. The FCA said it expects the measures to be confirmed shortly afterwards.
The city regulator already put rules in place so that those who used Personal Contract Purchase, Hire Purchase or Conditional Sale agreements to purchase a car would be able to temporarily put payments on hold without lenders ending agreements or repossessing cars.
The update will see those who have already requested and been granted a payment freeze be provided with an extension to the holiday, or be allowed to reduce payments to a level they can afford.
Christopher Woolard, interim chief executive at the FCA, confirmed the news in a statement on Friday: ‘It is vital that people facing temporary payment difficulties because of the impact of coronavirus get the assistance they need.
‘For those who have already taken a payment freeze and can afford to start making payments, even partially, it is in their best interest to do so, but for those that need help it will be there.’
If the rules are given the green light, the ban on repossessions will also continue until the end of October.
New car finance businesses was down 78% year-on-year in the April, the Finance and Leasing Association has confirmed
Some 45,842 new and used cars – worth a collective £681million – were financed in May, these figures show. That compares to 203,474 new and used vehicles – valued at £3.15billion in May 2019
Around nine in 10 new cars in Britain are bought on finance, on average.
New figures released today by the Finance and Leasing Association (FLA) show that new business volumes in the consumer car finance market fell in May 2020 by 78 per cent compared with the same month in 2019, and by 41 per cent in the five months to May 2020.
Some 10,776 new vehicles – with a total value of £241million – were financed during the fifth month of the year, despite dealerships being closed, though still able to provide click and collect services in the second half of May,
That compares to 74,762 new cars financed in May 2019, with a total value of £1.59billion.
Used car finance volumes were also down 73 per cent year-on-year, and 38 per cent lower in the first five months of 2020.
Car finance business is expected to see a recover from June, with dealers allowed to open to the public from the start of last month
Showrooms had to put in place strict social distancing measures in order to open for businesses from 1 June under relaxed lockdown rules
Geraldine Kilkelly, head of research and chief economist at the FLA, said that these figures suggest that while the motor finance industry continued to be severely impacted by the lockdown restrictions in May, ‘new business volumes improved on the record low in April’.
‘As the industry gears up to meet an extended period of forbearance and a strong pick-up in demand for new credit, the Government and Bank of England need to ensure that all lenders, including non-banks, have access to financial support schemes,’ she said.
‘This is vital if households and businesses are to be served by a competitive and vibrant motor finance industry post-crisis.’
Finance agreements are set to increase in June, with car showrooms being allowed to open en masse from 1 June under relaxed lockdown measures.
Commenting on the FCA’s draft guidance for motor finance lenders, Adrian Dally, head of motor finance at the FLA said: ‘The breadth of today’s guidance from the FCA recognises the variety of different situations that customers will be in at this point.
‘With more parts of the economy reopening, many customers will be returning to work and will be able to resume full payments. For those returning to part time work, partial payments are an option.
‘Customers who still need ongoing help will of course be supported. Motor finance lenders have been providing unprecedented levels of forbearance to customers since the start of the crisis, but it is now time for the Government to support the industry so that it is able to continue to offer finance to consumers and businesses at affordable rates during the recovery.’
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