The vast majority of vehicles sold in Western Europe are bought using someone elses money. The value of new car sales in Europe is a staggering 200bn Euros and when used cars and commercial vehicles are added, it is clear that the financing of vehicles is very big business. It is also extremely profitable for many companies. In 1998, more than a quarter of Fords profits were derived from finance and in some years the proportion has been more than half. It comes as no surprise therefore that a number of companies are now seeking to expand their operations in this area, while others are looking to enter the market for the first time.
Competition is set to intensify dramatically.
However, The European Vehicle Finance sector is facing some significant challenges, not least in the changing economics of the industry. The single European currency has meant that the market has moved ahead of the industry and is demanding services that the industry cannot yet provide. This is forcing companies to consider cross-border mergers. The single currency is also bringing down the price of new cars with consequent risk to residual values and ultimately to profits. In addition to this, the likely loss of block exemption by the vehicle manufacturers will have a dramatic effect on the price of both new and used cars.