Asset finance market shakes off Brexit fears

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Buoyant September market in all asset finance classes

The asset finance market in September shook off any fears over Brexit and the economic uncertainty surrounding the UK’s decision to leave the EU with one of the strongest performances of the year.

General economic indicators have remained positive despite the Brexit uncertainty, and the Bank of England revised upwards its growth forecasts for 2016 and 2017 and maintained the bank rate at 0.25% at the latest meeting of the Monetary Policy Committee.

The first official estimate of GDP in the third quarter of 2016 showed that the UK economy had continued to grow despite concerns following the EU referendum result.

At the same time, the latest figures from the Finance and Leasing Association (FLA) showed that asset finance grew by 12% in September compared with the same month in 2015, the 36th consecutive month of growth in the market, reaching a staggering £2.9bn for the month alone.

The growth wasn’t restricted to September was consistent throughout the third quarter of the year, the three months immediately following Brexit, growing by 12% compared with the same quarter in 2015 – the strongest quarterly rate of growth reported in more than a year.

Growth in all key asset finance categories

All of the main asset classes reported growth in new business in September compared with last year. Business equipment finance grew by 29% to £221 million; plant and machinery finance increased by 16% to £537 million; and IT equipment finance was 2% higher at £223 million.

The growth in new finance for plant and machinery in September was the second consecutive month of new business growth, contributing to growth of 6% in the third quarter as a whole.

Within this total, new finance for agricultural equipment grew by 25% in September to £131 million, and by 16% in quarter three. Also included was new finance for construction equipment which increased by 4% in September to £156 million, and by 4% in the third quarter.

New car market continues to grow

The UK new car market continued to grow steadily, despite any post-referendum economic uncertainty. Latest figures from the Society of Motor Manufacturers & Traders (SMMT) for October showed that the overall number of new car registrations grew by 1.4% compared with the same month last year to reach 180,168 new units.

Meanwhile, the fleet market recorded its eighth consecutive month of growth in October, as the number of new fleet registrations grew by 4.2% to 96,440.  Over the same period, the number of private new car sales fell by 1.1% to 77,821.

The latest SMMT forecasts suggest that 2016 new car registrations will be 2.678 million, 1.7% higher than in 2015, but that they are expected to fall next year by 5.0% to 2.544 million.

Motor finance also up

As a result, motor finance providers within the FLA reported new business volumes –up by 3% in September to 321,854 new units.  The corresponding value of this new business was 9% higher than last September at £5.0 billion.

Results for the third quarter overall showed that new business grew 8% by value and 6% by volume compared with the same quarter last year.

The point-of-sale consumer new car finance market reported new business volumes up by 3% in September compared with the same month in 2015, to reach 161,301 new units.  In the third quarter of 2016 as a whole, new business volumes in this market were also 3% higher than in the same quarter in 2015.

The percentage of private new car registrations financed at the point-of-sale by FLA members was 86.2% in the twelve months to September 2016, up from 85.5% in the same period to August 2016. Meanwhile, the value of point-of-sale new car finance provided to consumers in September was £2.9 billion, up by 9% compared with the same month last year.

Of this total, PCP new business was £2.3 billion, up by 10%; hire purchase fell by 8% to £347 million; and consumer leasing increased by 40% to £192 million.  The average advance provided to consumers for new cars in September was £17,799, 6% higher than in the same month in the previous year.

What were the most popular finance methods?

The third quarter results for all asset finance classes showed growth in new business provided through each of the main finance products.  Compared with the same three months last year, finance leasing grew by 10% to £897 million, operating leasing by 5% to £1.8 billion, and hire purchase by 5% to £4.0 billion.

In September, finance brokers recorded a second month of strong growth, with new business through brokers up by 28% compared with last year to £523 million.  The direct finance channel also reported a higher level of new business over that period, up 13% to £1.3 billion.

In the third quarter of 2016 as a whole, new business reported by the direct and broker-introduced finance channels grew by 12% and 17% respectively, compared with the same quarter in 2015.

Talk to your finance provider

Given the buoyant asset finance market, many companies may be looking to invest in new assets to expand their businesses or maintain a competitive advantage.

Investment decisions should typically start with your finance provider, and many businesses are increasingly seeking independent, rather than bank-provided, means of finance, often because the independent providers offer better rates of interest or less onerous terms than some of the traditional bank-based finance lines.

At Maxxia, we can provide solutions to many business finance needs, based around strong experience in the asset finance arena.

These can include finance solutions for a whole series of asset classes, such as new vehicles, plant and machinery, IT equipment, printing machinery, agricultural machinery and aviation equipment.

It’s important to discuss the solution that best suits your own business needs before making that final investment decision. This may be to optimise your cash flow, take advantage of short term windfalls, or spread your payments over the longest possible repayment period.

What’s the best solution?

Your finance provider should be able to draw on their experience and expertise to discuss with you the most suitable finance arrangement from the funding methods available.

And they should also provide a consultative approach which quickly identifies the key needs of your business.

Once these objectives have been clearly identified, your finance provider should work with you to offer the type of asset finance that will help your business do what it needs to.

Choosing the right provider should give you access to asset finance solutions suitable for a huge array of equipment across a wide array of sectors.

If you would like more details on how our approach to asset finance can work for you, please get in touch.

Maxxia - straightforward asset finance

By |November 14th, 2016|Categories: Asset Finance|0 Comments

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