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A leading asset finance provider has reported a record high in car refinancing over December and January.
NLG Leasing told The Adviser that over the two-month holiday period, it saw a 67 per cent rise in private and commercial motor vehicle loans, compared to the same period the year before.
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Frank Crombie, director of aggregation services for NLG Leasing, explained that the rise was due to greater consumer awareness of the loans on offer and the fact that more brokers are approaching clients about car finance.
He explained: “Consumers are becoming increasingly savvy about the financial options available to them and are starting to bypass traditional means of securing a loan (say through a dealership) in effort to save money, and no doubt redirect cash flow into other areas.
“When speaking with some brokers over the last few weeks, we asked their opinion about the factors that may be contributing to the increase in refinancing. As expected, they found that clients tended to approach them in January to discuss smarter financial solutions in the wake of the Christmas and the New Year expenditure hangover.”
According to NLG Leasing, the common reasons for refinancing were lower interest rates, lower repayments, released cash flow, and flexibility (such as the ability to make extra payments).
He added that the majority of commercial loans were coming from small- and medium-sized enterprises (SMEs) that were refinancing to “reallocate funds into other areas of the business that can positively effect efficiencies, productivity, sales and growth”.
Mr Crombie said: “A number of brokers also commented that they were prompting conversation about whether there was an opportunity to consolidate debt to release cash flow, and to ensure their clients’ cash flow was being used most effectively – something most people are happy to discuss.
“Importantly, what this suggests is that there’s a growing movement in both private and commercial sectors to utilise brokers in an advisory capacity and willingness to consider alternate funding structures. This is a fundamental, positive shift that equates to immediate opportunity.”
The director of aggregation services suggested that brokers get “across their client’s financial situation from a holistic perspective” to ensure clients benefit from a “customised solution that best represents their circumstance and financial goals” and keep them happy.
He concluded: “Happy customers equates to future sales through retention and positive word of mouth.
“Add asset finance into the mix and you have a ‘low hanging’ alternate revenue stream that enhances client relationships, increases revenue and provides a competitive advantage in a highly aggressive market. We encourage brokers to continue to simply ask their client about their current assets and financial goals to determine if they’ll benefit from asset financing.”
Several commentators have told The Adviser that refinancing will play a major role in the 2017 lending market, with many already seeing an uptick in refi by the end of 2016. For example, Will Foster of Foster Finance told the Elite Broker podcast that “there was a lot more refinance” in 2016 than in previous years as consumers became better educated about alternatives on the market and were no longer “happy with what their incumbent bank[s were] doing”, while Aussie Home Loans has revealed that there was an 11 per cent rise in refinancing deals in the September 2016 quarter through the broker channel, bringing in $1.8 billion.
[Related: Lending changes will make asset finance ‘easier field to play in’]
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