The UK asset finance market marches on

by Peter Dyson, Managing Director, White Clarke Group

The latest figures released by the Finance & Leasing Association (FLA) for April 2015 show the market continued its upward progress with healthy growth of 20% in asset finance new business compared with the same month a year earlier.

This follows impressive figures for March, for which growth compared with the same month a year earlier reached 27%, and showed 19% growth in Q1 2015 compared with Q1 2014.

New business volume (NBV) in April 2015 totaled an impressive £2.5 billion, and the total for the 12 months showed an increase of 15% on the previous year.

New Business Apr 15 % change on prev. year 3 months to Apr 15 % change on prev. year 12 months to Apr 15 % change on prev. year
Total FLA asset finance (£m) 2,540 +20 7,511 +21 27,551 +15
Total excluding high value (£m) 2,483 +22 7,188 +18 26,530 +15
Data extracts:
Plant and machinery finance (£m) 494 +12 1,529 +13 5,640 +17
Commercial vehicle finance (£m) 591 +18 1,762 +17 6,301 +10
IT equipment finance (£m) 137 +78 513 +60 1,851 +22
Business equipment finance (£m) 188 +12 546 +8 2,244 +12
Car finance 895 +27 2,354 +20 8,495 +16
Aircraft, ships and rolling stock finance (£m) 39 +112 231 +345 470 +83

Source: FLA

Sector highlights in April included growth in IT equipment finance of 78%, and plant & machinery finance (P&M) continued its bounce-back with growth of 12% compared with April 2014 after falling into negative territory in February.

Both car finance and commercial vehicle finance showed solid increases in the rate of growth of 27% and 18% respectively compared with the previous April.

Comparing NBV for the three months to April 2015 with the same period a year earlier, IT equipment finance was up by 60%, while car finance grew by 20% and P&M finance grew by 13%.

In April, the UK consumer car finance market grew at its strongest rate since September last year

Commenting on these figures, Geraldine Kilkelly, head of research and chief economist at the FLA, said: “The asset finance market reported another month of strong growth in April. Through the provision of leasing and hire purchase, FLA members financed 28.3% of UK investment in machinery, equipment and purchased software in the 12 months to March 2015, up from 27.1% in the same period in 2014.”

Strong growth continues for car finance

Following a first quarter of healthy growth across all segments of the car finance sector, the most recent FLA figures show this overall trend continuing in April 2015.

Point-of-sale consumer new car finance unit volumes grew 11% compared with the same month a year earlier, and by 9% compared with the previous 12-month period.

The value of advances grew 17% to £1.2 billion in April 2015 compared with the same month a year earlier, and year-on-year growth stood at 14%.

The percentage of private new car sales financed through dealerships by FLA members reached a new record level of 76.8% in the 12 months to April.

The point-of-sale consumer used car finance market also put in a good performance in April, with unit volumes up by 15% and values up by 19% at £1.06 billion. Used car volumes rose 12% in the three month period and 11% over the 12-month period, while the value of advances grew 16% for both the three-month and 12-month periods compared to the previous year.

Commenting on these figures, Geraldine Kilkelly stated: “In April, the consumer car finance market grew at its strongest rate since September last year. This contributed to growth of 8% in new business volumes in the first four months of 2015, which is in line with market expectations for growth in 2015 as a whole.”

Cars bought on finance by consumers through dealerships Apr 15 % change on prev. year 3 months to Apr 15 % change on prev. year 12 months to Apr 15 % change on prev. year
New cars
Value of advances (£m) 1,245 +17 4,616 +14 14,639 +14
Number of cars 75,929 +11 285,846 +8 916,160 +9
Used cars
Value of advances (£m) 1,058 +19 3,107 +16 11,131 +16
Number of cars 101,506 +15 299,262 +12 1,080,600 +11
Cars bought on finance by business Apr 15 % change on prev. year 3 months to Apr 15 % change on prev. year 12 months to Apr 15 % change on prev. year
New cars
Number of cars 52,409 +29 134,604 +15 498,938 +13
Used cars
Number of cars 3,080 -31 10,436 -1 40,398 -18

Post-election confidence

These impressive monthly figures indicate little trepidation prior to the General Election. Now that is past and the result known, the question is whether there will be evidence of greater support for small and medium-sized enterprises (SMEs) from the new administration.

One positive sign, again relating to the pre-election period but a good portent, is the new figures from the Bank of England that show net lending by banks and building societies through the funding for lending scheme (FLS) is improving.

Net lending to SMEs totaled £615 million in Q1 2015, the Bank said, following an £800 million fall in the final quarter of 2014. Lloyds Banking Group accounted for the majority of the increase, with lending rising £409 million in the latest quarter.

Aggregate net lending to SMEs (i.e. including lending by banks and building societies not participating in the FLS) was also positive in Q1 2015. According to the Bank, this is part of a broader improvement in lending to all non-financial businesses.

However, UK manufacturing is not expanding as hoped, especially compared with growth in the services sector. The Markit/CIPS Purchasing Manager’s Index (PMI) for May nudged upward to 52.0, extending the current sequence of expansion to 27 months, although the rate of output growth edged lower.

Rob Dobson, senior economist at Markit commented: “Expectations of a broad rebound in UK economic growth during the second quarter of the year are called into question by these readings,” adding: “Manufacturing looks on course to act as a minor drag on the economy, as the sector is hit by a combination of the strong pound and weak business investment spending.”

Speaking for the leasing industry, the FLA view is that SMEs need a one-stop-shop for finance. Responding to the announcement by the new Business Secretary, Sajid Javid, that an Enterprise Bill would be part of the Government’s legislative plans, Simon Goldie, Head of Asset Finance at the FLA, said: “We welcome the support for enterprise, but would also like to see the Government provide a comprehensive online directory of finance providers to help firms find the funding they need in a one-stop-shop.”

The new, in-depth Asset Finance International UK Asset and Auto Finance Country Survey for 2015, produced in association with White Clarke Group, is free to download.

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