A turning of the curve for the Motoring Industry?

newsmlmmd.73d1539c963d727e83bf3fd74a73fbca The latest figures released by the Finance and Leasing Association on the number of new and used cars bought with dealer finance may indicate a turning of the curve, or at the least a bottoming out, as far as the wider global economic downturn is concerned, but a full recovery in the motoring industry is still a long way off as Formula One continues to ride out the storm.

The number of cars bought by consumers using finance obtained through dealerships in June fell by 6% compared with the same month a year earlier – the smallest drop since September 2008.

However, the FLA has warned that more financial stimulus and a long-term plan from Government are needed if lenders are to meet demand when the economy recovers.

Geraldine Kilkelly, Head of Research and Chief Economist at the FLA, said: “We have seen the smallest drop in motor finance since September 2008, but motor finance providers are still very concerned about the lack of well-priced funding on the wholesale markets.

“While most lenders are able to meet demand at the current reduced levels, if demand increases in the second half of the year the availability of credit for car buyers may become an issue.

“The Government needs to prepare for a sustainable recovery by ensuring that the car finance industry has the capacity to meet future demand.”

New motor finance business was down significantly in the first half of 2009 compared with 2008. During that period, the number of private new and used cars purchased using dealer finance fell by 23% and 10% respectively.

The business car finance market also struggled. Finance provided to businesses for new cars fell in the six month period to June by more than a third compared with the same period in 2008. Business confidence remains low with companies delaying investment not least because of the availability and cost of credit.

There is little doubt that behind closed doors and in the boardrooms of some car manufactures, Formula One is viewed merely as a promotional playground, and along with other sporting and sponsorship campaigns it would have been promptly reviewed when sales slumped.

Honda shocked the sport when it pulled the plug on grand prix racing at the beginning of the year and more recently BMW Sauber have confirmed that they will sell their team.

Renault is also speculated to be considering its position. The French car manufacturer announced a loss of $3.8bn for the first half of 2009 although it said that it would “prepare for the post-crisis period” with a “consolidation of our presence in emerging markets”.