Large financier withdraws sub-prime car loans

Welcome Car Finance, the UK’s largest financier of "sub-prime" car loans announced today that it is withdrawing funding from hundreds of independent dealerships. The company denied the move had anything to do with lack of funding because of the current credit crunch. Instead, the company, which is part of Cattles and specialises in loans to those with poor credit histories, said it was facing an increased customer demand for its own dealerships. The company claims it is more profitable to run its own dealerships than to provide car loan finance to third-party dealers. The impact on motorists could be substantial. In particular, thousands of drivers looking for a loan on a second hand car are likely to be affected. These people tend to buy from independent used car dealerships, which in turn need to be able to offer car loan options to help their customers make a purchase. The typical APR on a Welcome Car Finance loan is 19.9 per cent – a comparable rate to that of a credit card. However, many buyers with less than perfect credit histories will accept a high rate of interest if it means they can afford the monthly repayments on their vehicle of choice. David Gregory, founder of the blogging site Car Credit Complaints, said: "Most of the sub-prime car market relies on Welcome, so many dealers will find this devastating.