FCA rulings put pressure on residual values in UK
Recent rulings by the UK's Financial Conduct Authority on fair selling are likely to have a negative impact on residual values in the UK, says Denis Keenan (CEO, KeeResources).
Current high retail and trade values have been supported by profits from finance paper that the FCA now deems unfair to consumers, Keenan says. This will restrict the ability of the retail trade to have very low margins on the metal.
“The effects will largely be felt in stocks three years old or more. Younger vehicles have been generally well served by manufacturer captives, and some have already taken aggressive APR-capping measures”, according to Keenan.
Finance houses have until now been willing to allow high Annual Percentage Rates (APRs), but that will have to change to meet FCA requirements. Real downward pressure on residual values is expected at the end of the year, or even in the next one. The only certain thing is that it will come: “There is an inevitability that ‘acceptable’ ﬁnancing behaviours will become the norm ongoing.”