Dealer finance ‘floor’ plan does the trick

A RADICAL car dealer funding body created by the federal government appears to have largely accomplished its aims without lending a single dollar.

Many dealers abandoned last year when the two major US financiers pulled out of the industry have found other sources of funding, according to the Federal Chamber of Automotive Industries (FCAI).

FCAI chief executive Andrew McKellar said feedback from dealers suggested a substantial proportion of those affected by the withdrawal of GMAC and GE Money had been successful in finding alternative finance.

He said he believed the creation of the government’s so-called Special Purpose Vehicle (SPV) had put a floor under the dealer finance market and prompted alternative financiers to move quickly.

“Apart from anything else, the presence of the SPV has placed additional pressure on some of those other existing financiers to speed the process if they were going to enhance their market position as a result of the withdrawal of the two established financiers.” Mr McKellar said the alternative financiers had moved more quickly than anticipated to gain access to the dealers they wanted.

“There are still going to be some (dealers) who are affected and who are looking for new sources of finance. There is still work to be done, but I think (the SPV) has already gone a substantial way to serving its purpose.” Mr McKellar said he hoped the level of dislocation in the automotive trade had been minimised.

He said some dealers were concerned about the potential pricing of finance available from the SPV, but he pointed out that the SPV was created as a lender of last resort and that such pricing was not inconsistent with that role.

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Future funding?