Is consumer car finance the next big opportunity for P2P?

  • Two very clear trends are emerging in the Alternative Finance sector. First, with lenders casting aside any doubts about security to get at the attractive yields available, the pressure is on for most P2P platforms to attract borrowers rather than investors; and, second, there is mounting evidence to suggest that dealing with real people matters when it comes to talking finance.

    Zopa, which recently become the first UK platform to hit the magic £2bn in loans mark, is now training its eyes on the car finance market to satisfy the voracious appetite of its lenders. Zopa is basing its strategy on the fact that most people sign up to a finance package in the car showroom – and thus are not so much disadvantaged by the price of the car, but the cost of the finance. Zopa says in its release that people could do much better by raising the money first and then cutting a cash deal with the salesperson.

    There has been a lot of innovation in car finance in recent years with PCP’s and PCH deals being the norm over straightforward loans. While possibly expensive when looked at in pure interest rate terms, these products provide convenience and an affordable monthly payment that is proving attractive to many people. One wonders how Zopa plans to compete with these.

    Another possible fly in the ointment is the commission the dealership receives from selling the finance, which can all be bundled into the price of the car. Cash deals are not always the best way to negotiate given the margins available in the trade-in and other add-ons the dealer has to play with. Doubtless the people at Zopa will have an answer for this too.

    Elsewhere, both Assetz and Folk2Folk are setting out to prove – albeit in slightly different ways – that people prefer to deal with humans when discussing finance. The Assetz route is to double its network of Regional Relationship Directors to 40 by January 2018, saying that it is expanding its regional presence to build up an intimate knowledge of the areas.

    Meanwhile, Folk2Folk has just opened its fourth branch, this time in Harrogate, North Yorkshire, with a target of providing £20m worth of property-backed loans in the first year.

    Maybe clearing banks, with old-style bank managers embedded in the local community, had the right idea all along – they just had too many of them. Clearly, dealing with your finances over a remote internet platform is still not for everyone.

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