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Asset finance market sparks recovery in March, but still down on pre-pandemic levels

Total asset finance new business grew by 15% in March 2021 compared with the same month in 2020, reaching £3.2 billion, according to the Finance & Leasing Association (FLA).

However, due to the national lockdowns in March 2020, a more accurate depiction of how the market is performing can be drawn by comparing it to March 2019.

By doing this, we can see that the asset finance market is still 12.6% down from the pre-pandemic levels in March 2019.

Other key points from the FLA’s announcement included:

  • Business equipment finance has decreased the most from March 2019, down 18.7%;
  • This is followed by commercial vehicle finance, which is still operating at a 13.6% reduction.
March 2021% change from March 2020-21March 2020% change from March 2019-21March 2019
Total FLA asset finance (£m) 3,217+15%2,793-12.6%3,679
By asset:
Plant & machinery finance (£m) 649+13%575-10.9%728
Commercial vehicle finance (£m) 859+22%705-13.6%994
IT equipment finance (£m) 198-18%242-6.2%211
Business equipment finance (£m) 205+14%184-18.7%252
Car finance (£m) 908+9%832-8.6%993
By channel:
Direct finance (£m) 1,236-3%1,286-27.8%1,711
Broker-introduced finance (£m) 718+42%507+9.1%658
Sales finance (£m) 1,054+18%891+2%1,033

However, one benefit of comparing the market to March 2020 is that it offers an insight into how successfully the market has adapted to meet the challenges of the pandemic.

In this case, commercial vehicle finance grew the most from March 2020, marking an increase of 22% to £859 million. This could mean that the commercial vehicle finance market has adapted the best to operating under the restricted conditions, alternatively it could mean that businesses are prioritizing this form of finance over others and so more cash can be generated in this sector.

Geraldine Kilkelly (pictured above), director of research and chief economist at the FLA, said: “March saw the asset finance market report its highest monthly new business total since June 2019. A year on since the introduction of the first restrictions to deal with the pandemic, the market and wider economy continue to be impacted by ongoing restrictions. However, the latest set of figures show that the industry has adapted to meet the challenges posed by the crisis.”

In the three months leading up to March 2021, the market achieved £7.6 billion, still 10.4% under the same period in 2019. Similarly, whilst the market achieved £27.42 billion in the 12 months leading up to March 2021, this was still 18% down compared to March 2019.

 3 months to March 2021% change from 201912 months to March 2021% change from 2019
Total FLA asset finance (£m)7,603-10.4%27,420 -18%
By asset:
Plant & machinery finance (£m) 1,704-8.4%6,011-15%
Commercial vehicle finance (£m) 2,036-8.7%7,137-15%
IT equipment finance (£m) 518-15.4%2,334-16.9%
Business equipment finance (£m) 449-28%1,698-36.4%
Car finance (£m) 1,948-11.8%7,171-19.8%
By channel:
Direct finance (£m) 3,080-21.5%11,955-22.8%
Broker-introduced finance (£m)1,626-1%5,554 -12.6%
Sales finance (£m) 2,259-1.5%8,022-13%

Written by Miles Rogerson

Source: Asset Finance International

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Asset finance grows for first time in a year, reaching £26 billion in February

The UK asset finance market has achieved growth for the first time in more than a year, according to new figures released by the Finance & Leasing Association (FLA).

In February, total asset finance new business reached £2.2 billion, marking a 1% rise on the previous year and a key milestone in the economic recovery following the pandemic.

Furthermore, in the 12 months up to February 2021, total asset finance was down 24% to £26 billion, showing the true impact of the pandemic on the UK asset finance landscape.

Plant and machinery finance fared the best during February this year with new business rising to £585 million, up 14% compared to the same month in 20s20. This was in stark contrast to the business equipment finance sector which saw a 24% decline in new business to £130 million.

 Feb 2021% change on prev. year12 months to Feb 2021% change on prev. year
Plant & machinery finance (£m)585 145,930-17
Commercial vehicle finance (£m)623 86,988-23
IT equipment finance (£m) 167-202,378-17
Business equipment finance (£m) 130 -241,673-27
Car finance (£m) 434 -187,048-29

When looking at the FLA’s figurework by channel, all sales channels were down. Broker-introduced finance was responsible for £476 million, equalling an 8% decline on the previous year.

Similarly, direct finance was used for £944 million of new business, marking a 1% decline on the previous year.

 Feb 2021% change on prev. year12 months to Feb 2021% change on prev. year
Direct finance (£m)44 -111,993-27 
Broker-introduced finance (£m) 476 -8 5,313 -22
Sales finance (£m) 585 -6 7,848 -18

Geraldine Kilkelly, director of research and chief economist at the FLA, said: “While the FLA welcomes the measures announced in the budget to ensure that a strong pick-up in business investment is part of the UK economic recovery, we urge the government to extend the super-deduction allowance for expenditure on qualifying plant and machinery to include leasing.”

Additional data from the Society of Motor Manufacturers and Traders (SMMT) shows that new car registrations in March had grown for the first time since August 2020. They hit an additional 29,280 vehicles in the month, marking a rise of 11.5% on the previous year.

Written by Miles Rogerson

Source: Asset Finance International

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How asset finance companies can help SMEs to recover from COVID-19

There has arguably never been so much support for SME businesses than during the COVID-19 pandemic.

In the UK, the Coronavirus Business Interruption Loan Scheme and the newly introduced Bounce Back Loan Scheme are now thought to have provided over £10 billion worth of loans to the UK’s small businesses.

The Bounce Back Loan Scheme has had a tremendous impact, with more than £5 billion of funding approved in its first three days.

Under the CBIL Scheme, banks are having to guarantee 20% of the value of the loan and the business owner has to personally guarantee the loan if it is more than £250,000, meaning it has been less popular than the Bounce Back Loan, which is 100% government backed and quicker to provide.

With some investors’ sentiment levels falling to levels last seen during the 2008 financial crisis, asset finance opportunities may also offer crucial lifelines for small and medium-sized businesses.

For many small businesses, the major benefit of asset finance over a loan is the fact that business owners do not have to put up any of their other business or personal assets as security because the provider is not loaning any money – they are providing the asset itself, on a hire or lease basis.

As the finance provider legally owns the asset, at least until the SME has repaid the full value, that payment serves as the security.

Because asset financiers cannot decide to recall the loan at any point, as no money has been loaned, the business has greater security throughout the lifetime of the agreed term. This means that, unlike other loans or schemes, businesses can accurately plan their financial future on a more clear and stable footing.

As well as the securities that asset finance arrangements give, they can also be very flexible.

For SMEs, there is often a lot of scope to negotiate payment options. During the COVID-19 crisis, this has been invaluable for many businesses, particularly for those in the hospitality sector.

Asset financiers can support these businesses by helping their business leaders to gain access to vital infrastructure.

Asset financing is an exceptionally valuable tool, which many SMEs should look towards; especially as they rebuild their businesses over the coming decade.

To help them, finance providers need to explain the clear benefits to their potential clients in terms of how these agreements can help their cashflow and support revenue growth – something which many SMEs will be yearning for right now.

Written by Reece Tomlinson

Source: Asset Finance International

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Asset finance market reaches record level in UK during 2019

The UK asset finance market reached record levels last year as demand grew 6%, according to the Finance & Leasing Association (FLA).

Latest FLA figures show that total asset finance new business (primarily leasing and hire purchase) reached a record level of £35.7 billion.

In the final month of the year, business only grew by 1% compared to December 2018, but the record was secured by strong performances earlier in the year.

During December 2019, the IT equipment finance sector continued to report double-digit growth as new business increased by 10% compared with the same month in 2018.

By contrast, the commercial vehicle finance and plant and machinery finance sectors reported falls in new business of 2% and 22% respectively, over the same period, potentially reflecting uncertainty as companies waited for the results of a general election and future clarity on Brexit.

In 2019 as a whole, the commercial vehicle finance and plant and machinery finance sectors reported the strongest growth rates, with new business up by 9% and 5% respectively, compared with 2018.

Geraldine Kilkelly, head of research and chief economist at the FLA, said: “The asset finance industry reached a record level of new business in 2019, despite continued weakness in business investment. Within the overall total, more than £20 billion went to SMEs to fund investment in machinery and equipment, 4% higher than in 2018.

“Key industry sectors benefitted from using asset finance last year, with double-digit growth in new finance provided for construction and manufacturing equipment.”

UK Asset Finance Market 2019

Dec 2019 % change on

prev. year

3 months to

Dec 2019

% change on

prev. year

12 months to

Dec 2019

% change on

prev. year

Total FLA asset finance (£m) 2,943  8,679  35,653 
Total excluding high value (£m) 2,605 0 7,970 0 33,008 5
By asset:
Plant and machinery finance (£m) 530 -22 1,677 -9 7,320 5
Commercial vehicle finance (£m) 693 -2 2,186 -7 9,136 9
IT equipment finance (£m) 376 10 840 25 2,830 3
Business equipment finance (£m) 231 2 603 -9 2,465 -2
Car finance (£m) 754 8 2,382 4 9,998 4
Aircraft, ships and rolling stock finance (£m) 35 17 116 -5 566 88
By channel:
Direct finance (£m) 1,279 -5 3,987 -1 16,680 5
Broker-introduced finance (£m) 522 1 1,689 1 6,782 9
Sales finance (£m) 804 7 2,294 1 9,546 2
By product:
Finance leasing (£m) 339 -15 1,088 -8 4,378 3
Operating leasing (£m) 640 7 1,815 1 6,984 1
Lease/Hire purchase (£m) 1,458 -5 4,476 -4 19,305 6
Other finance (£m) 336 35 930 44 3,587 18

Source: FLA

Written by John Maslen

Source: Asset Finance International

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UK asset finance market posts strong Q3 results as businesses stockpile in anticipation of Brexit

Asset finance new business (primarily leasing and hire purchase) grew 5% during Q3 2019 compared to the same period last year, according to figures from the Finance & Leasing Association (FLA).

The association also reported 5% year-on-year growth during September.

The strongest September growth came from finance for plant and machinery and business cars, while aircraft, ships and rolling stock finance leapt 78%, but from a relatively low base.

In contrast, commercial vehicles remained flat during the month, although demand was up 8% for the quarter and 14% over the preceding 12 months.

IT equipment finance fell 10% and business equipment finance was down 1% during the month compared to the same period in 2018.

Geraldine Kilkelly, head of research and chief economist at the FLA, said: “In September, the asset finance industry reported its strongest growth in new finance for plant and machinery since January 2019 as businesses stockpiled ahead of another Brexit deadline.

“The industry has seen total new business grow in all but one month so far in 2019, with the latest annual new business total reaching a record level of £34.5 billion.”

Lease/hire purchase remains the dominant form of finance, accounting for 57% of the market in September and reporting year-on-year growth of 4%.

Sep 2019 % change on

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3 mths to

Sep 19

% change on

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12 mths to

Sep 19

% change on

prev yr

Total FLA asset finance (£m); 2,907 +5 8,454 +5 34,474 +7
Total excluding high value (£m) 2,688 +5 7,862 +5 31,959 +5
By asset:
Plant and machinery finance (£m) 623 +15 1,850 +9 7,445 +12
Commercial vehicle finance (£m) 730 0 2,148 +8 9,098 +14
IT equipment finance (£m) 309 -10 757 -8 2,663 -6
Business equipment finance (£m) 180 -1 1,584 -4 2,597 +5
Car finance (£m) 712 +4 2,160 +4 8,965 0
Aircraft, ships and rolling stock finance (£m) 20 +78 87 +71 541 +126
By channel:
 Direct finance (£m) 1,217 -1 3,859 +4 16,062 +6
 Broker-introduced finance (£m) 541 +4 1,623 +5 6,616 +12
Sales finance (£m) 930 +15 2,380 +6 9,281 +1
By product:
Finance leasing (£m) 405 -8 1,064 +2 4,256 +7
Operating leasing (£m) 501 +1 1,473 0 6,103 -1
Lease/Hire purchase (£m) 1,566 +4 4,718 +8 19,497 +10
Other finance (£m) 280 +20 877 +5 3,313 +8

Written by John Maslen

Source: Asset Finance International

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Asset finance companies sign up to SME Finance Charter

Leading asset finance companies have pledged their support for a new SME Finance Charter launched in a collaboration between the industry, business organisations and the government.

The high-level commitments in the charter have been signed off by the Business Finance Council and reflect areas identified as being significant in ensuring that the SME finance market works effectively, particularly throughout Brexit.

Lenders have signed up to five broad aims, which they have each personalised with an explanation of how they will meet their commitments.

The aims are:

1. We’re open for business and ready to lend.
2. We’ll help you prepare for Brexit and beyond.
3. We’ll support your application and signpost other options if needed.
4. We’ll treat you fairly at all times.
5. We’ll work with the government-owned British Business Bank to support SMEs.

Lenders that have signed up to the charter include a number of 2019 International Asset Finance Network Award winners. The signatories are:

Aldermore – IAFN European SME Finance Provider of the Year 2019

  • Bank of Ireland
  • Bank of Scotland
  • Barclays
  • Bibby Financial Services
  • Close Brothers – IAFN European Bank Lessor of the Year 2019
  • CYBG
  • Funding Circle
  • HSBC
  • Lloyds Bank
  • NatWest
  • RBS
  • Santander UK
  • Secure Trust Bank
  • Simply – IAFN European Equipment Finance Lessor of the Year 2019
  • Ulster Bank
  • Ultimate Finance

Mike Randall, chief executive officer of Simply, said: “The SME Finance Charter is incredibly important and we’re proud to be a part of it. Ensuring entrepreneurs, family businesses and small and medium-sized enterprises across the country have access to the finance they need to grow and prosper is vital. Simply has a company-wide commitment to SMEs, providing tailored solutions and long-term partnerships that will see them through good times and bad. SMEs want to feel safe in the knowledge they can get funding quickly and our business is built to do this.”

Edward Winterton, UK chief executive of Bibby Financial Services, said: “We recognise the importance of helping our clients and other SMEs to prepare for Brexit, which is why we have signed-up to the SME Finance Charter.

“We’ve supported UK businesses for more than 35 years and are committed to continuing this support by helping them to access the funding they need and through additional support services, throughout Brexit and beyond.”

Josh Levy, chief executive officer of Ultimate Finance, added: “We tailor our funding by looking at the bigger picture to find the right solution at the right time – an approach that’s integral in the current uncertain context. Whatever happens to the UK economy and the terms of our departure from the EU, it’s certain that the country needs SMEs to continue to be as ambitious, flexible and resilient as before, and with the right funding and non-financial support that we will continue to provide, we have no doubt that businesses will rise to this, through Brexit and beyond.”

Lenders were congratulated by senior government officials for their commitment, including minister for small business Kelly Tolhurst.

She said: “Financial support from banks and lenders is often crucial to the success of an SME. Continued and proactive support will give SME customers the confidence they need ahead of Brexit and beyond – with opportunities to thrive, grow and scale up in new markets.”

The commitment comes amid continuing political and economic uncertainty over the result of the 2016 Brexit referendum vote to leave the European Union.

While Prime Minister Boris Johnson is focused on delivering Brexit by October 31, he lacks a majority in parliament and his proposals have suffered repeated defeats to MPs who oppose his plans, including rebels in his own party.

The UK has already missed one deadline to leave the EU under the previous prime minister, Theresa May, who resigned after failing to win parliamentary support for her departure deal.

Johnson has struck a new deal with the European Union, but European Commission President Jean-Claude Juncker said this week that it could only approve the UK’s exit once it has been given the green light by the British parliament.

He told European MPs in Strasbourg: “It is not possible, not imaginable, that this parliament would ratify the agreement before Westminster has ratified the agreement. First London, then Brussels and Strasbourg.”

After his latest parliamentary defeat, Johnson has been forced to write to European leaders requesting another potential extension to the deadline if British MPs fail to back the deal by the end of the month.

European Council President Donald Tusk is discussing the request with leaders of the other 27 EU member states, with a decision expected “in the coming days”.

Written by John Maslen

Source: Asset Finance International

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Commercial vehicle finance underpins UK asset finance market growth

Commercial vehicle finance was one of the only growth markets during August for UK asset finance new business (primarily leasing and hire purchase), according to new figures from the Finance & Leasing Association.

Finance for commercial vehicles was up 11% year-on-year in August and it has risen 14% over the past 12 months.

Other sectors were less buoyant, with plant and machinery up 1% during August compared to the same month last year, while business equipment finance and car finance were down 1%. Aircraft, ships and rolling stock finance nearly doubled, but it only makes up a small proportion of the asset finance market.

Geraldine Kilkelly, head of research and chief economist at the FLA, said: “August saw further double-digit growth in new finance provided for commercial vehicles as businesses were keen to invest in the newest technology.

“The strong performance of the industry so far this year meant it funded over 41% of investment in machinery, equipment and purchased software in Q2 2019, an 11-year high.”

Responding to the results, Chirag Shah, chief executive officer, Nucleus Commercial Finance, said: “We’re seeing more and more SMEs turn to asset-based finance to support their business ambitions, whether that be to restructure, deliver further growth or to enhance their cash flow.

“Despite the growth in the market, a major knowledge gap still exists when it comes to SME funding, particularly how asset-based lending solutions can be used to help businesses achieve their goals by leveraging assets such as property, stock and machinery. There is a big opportunity for the market to continue growing and it’s therefore our responsibility as an industry to educate SMEs on all the options available and to demonstrate the positive impact alternative finance can have on a business.”

August 2019 % change on

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3 mths to

August 2019

% change on

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12 mths to

August 2019

% change on

prev yr

Total FLA asset finance (£m) 2,452 0 8,778 +5 34,311 +6
Total excluding high value (£m) 2,321 +1 7,946 +2 31,820 +5
By asset:
Plant and machinery finance (£m) 585 +1 1,842 +5 7,343 +11
Commercial vehicle finance (£m) 667 +11 2,256 +11 9,110 +14
IT equipment finance (£m) 166 -16 704 -15 2,692 0
Business equipment finance (£m) 211 -1 1,626 -4 2,622 +4
Car finance (£m) 572 -1 2,269 +2 8,935 -2
Aircraft, ships and rolling stock finance (£m) 19 +95 173 +126 533 +115
By channel:
Direct finance (£m) 1,160 0 4,042 +4 16,086 +6
Broker-introduced finance (£m) 513 +6 1,627 +5 6,574 +12
Sales finance (£m) 648 0 2,276 -3 9,160 -2
By product:
Finance leasing (£m) 310 +4 987 +2 4,321 +11
Operating leasing (£m) 430 -2 1,478 -2 6,098 -4
Lease/Hire purchase (£m) 1,373 +3 4,927 +7 19,408 +10
Other finance (£m) 270 +13 954 +3 3,252 +6

Source: FLA

Written by John Maslen

Source: Asset Finance International

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Asset finance share of UK equipment investment highest for a decade in May

Asset finance new business (primarily leasing and hire purchase) in the UK for deals of up to £20 million grew by 6% in May, compared to the same month last year, according to new data from the Finance and Leasing Association.

When deals over £20 million are included, the market fell by 1%.

New finance for plant and machinery and commercial vehicles both grew by 8% year-on-year during the month, while the business equipment finance sector reported new business up by 3% over the same period.

The car finance market was static, while the IT finance sector fell by 9% year-on-year.

Geraldine Kilkelly, Head of Research and Chief Economist, said: “The asset finance market continued to report growth across many sectors in May, with new business overall up by 8% in the first five months of 2019.

“The strong performance so far this year means that the industry is helping to fund an increasing share of business investment.

“The percentage of UK equipment investment funded by asset finance members in Q1 2019 was 38%, the highest for more than a decade.”

Written by John Maslen

Source: Asset Finance International

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Asset-based funding is vital route for many businesses

Asset Based Lending (“ABL”) remains an important route to funding for many retailers, wholesalers and manufacturing small to medium enterprise (“SME”) businesses in particular; and will continue to be a key access to funds both in its current guise and in future form as funding and security pools change. ABL remains the most fluid and flexible form of security with SMEs reliant on floating charge lending incorporating inventory revolving facilities along with the primary invoice finance form of ABL supported by additional plant and machinery and property term loan facilities.

Investors use ABL to support acquisitions, as do MBO/MBIs deals, both of which have maintained traction amid economic and market uncertainty. Brexit has presented many challenges for UK businesses reliant on or exposed to Europe with some stockpiling due to the unknown, tariffs and variable trade restrictions that may well be implemented, which can prove to be an issue when cashflow is tight. Purchasing in advance leads to reduced cash availability in order to thrive withadded costs hindering a business. ABL eases cashflow issues and concerns via fixed and floating charge facilities.

ABL enables business to raise higher levels of funding to facilitate strategic plans or simply release additional working capital. ABL can offer higher levels of funding than invoice finance alone and release working capital against inventory, plant and machinery and property as noted. ABL is a bespoke solution, designed around a borrower’s specific requirements. For businesses with proof of strong cash generation in the past and positive cash forecast for the future, cash flow loans may also be available to further top up funding lines where appropriate.

Further risks loom with UK ABL under threat from the 2020 Crown Preference plans with proposals for the crown to be preferential in respect of floating charge lending that would likely impact inventory in particular. Undoing the Enterprise Act effectively leads to the crown once more ‘jumping the queue’. Lenders secured on an inventory floating charge may well be exposed and under collateralised in an insolvency. Crown liabilities need to be up to date to mitigate exposure and risk. Should proposals be approved; and there continues to be a great deal of opposition, floating charge lending could be as risky as unsecured lending. The UK needs reliable access to ABL funds to operate; and putting floating charges at risk may restrict access to flexible funding in the future, which will only be detrimental to HMRC in the long term.

We are perfectly positioned to support lenders and SMEs through the challenges and risks ahead offering advice and due diligence to assess the exposure and options to mitigate the risk. We provide independent and specialist all asset class valuations and sector guidance relating to inventory floating charge and receivable fixed charge facilities, along with plant and machinery and property term loans.

Source: The Business Desk

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UK asset finance market grows by 11% in first quarter of 2019

Asset finance new business (primarily leasing and hire purchase) grew by 11% during Q1 2019 compared to the same period last year, according to new figures released today by the Finance & Leasing Association (FLA).

New finance for manufacturing and construction equipment increased by 25% and 26% respectively, compared to Q1 2018.

The growth followed a strong market in March, which grew by 11% year-on-year, with including particularly high growth in commercial vehicle finance and IT equipment finance sectors.

All channels delivered growth during the quarter, although the strongest performance came from broker-introduced finance, which rose 19% year-on-year.

During March, broker-introduced finance accounted for 19% of sales, up from 18% for the same period last year, while direct finance took 50%, down from 51%, and sales finance 30%, down from 31%.

Geraldine Kilkelly, head of research and chief economist at the FLA, said: “The asset finance market reported a record level of monthly new business in March and the strongest quarterly growth in Q1 2019 since Q3 2016.
“Asset finance continued to support key sectors of the economy in the first quarter.”

March 2019 % change on

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3 mths to

March 2019

% change on

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12 mths to

March 2019

% change on

prev yr

Total FLA asset finance (£m) 3,679 +11 8,490 +11 33,447 +7
Total excluding high value (£m) 3,403 +7 7,861 +9 31,069 +5
By asset:
Plant and machinery finance (£m) 728 +11 1,861 +12 7,055 +8
Commercial vehicle finance (£m) 994 +17 2,231 +23 8,402 +14
IT equipment finance (£m) 211 +5 612 +18 2,808 +19
Business equipment finance (£m) 252 -1 623 +2 2,670 +5
Car finance (£m) 993 -3 2,209 +2 8,940 -3
Aircraft, ships and rolling stock finance (£m) 111 +238 147 +122 392 -12
By channel:
Direct finance (£m) 1,711 +5 3,926 +7 15,492 +4
Broker-introduced finance (£m) 658 +19 1,642 +19 6,354 +16
Sales finance (£m) 1,033 +3 2,293 +5 9,223 +1
By product:
Finance leasing (£m) 429 +6 1,040 +14 4,220 +11
Operating leasing (£m) 645 -10 1,447 -6 5,894 -9
 Lease/Hire purchase (£m) 2,006 +9 4,756 +15 18,769 +11
Other finance (£m) 439 +53 963 +24 3,240 +7

Written by John Maslen

Source: Asset Finance International