Arrears & ResidualsCompared to 2013, in 2016 customers finance balances are higher. Even higher than the relative increase in the cost of the vehicle. Suggesting customers are buying more expensive cars with smaller deposits.Asset valuations from firms appear to be robust. Stress tests show that firms would not be materially distressed with a fall in residual values. Low scoring customers are a relatively small part of the market, lending to high credit score customers has increased more than low credit score customers.Delinquency of accounts were relatively low compared to personal loan and credit card data.Low credit score customer rates delinquencies are higher than higher credit scored customers (really!) but have increased as a percentage score more than the high credit score customers.FCA don’t think that customers are prioritising vehicle debt payment over other house hold debt. Affordability analysis is being kicked out to the next phase of work (Sept 2018)
Commission ArrangementsIncreased DIC and Decrease DIC models produce similar dealer incentives.Differences’ in commission levels for different rates can be significant. Suitable controls required.Independent dealer packages had a stronger link to incentives than the franchised dealer network. Lenders should conform to the “Staff incentives, remuneration and performance management in consumer credit” guidance.Further work in the next phase to test lenders systems and controls.Checking of websites (lenders and dealers) and mystery shopping is ongoing.Dealers you have been warned!