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Yes Car Credit: you can't any more

15th December 2005

Following a three month review and expected losses of GBP24 million in 2005, Provident Financial announced that it has closed its specialist sub-prime motor finance division. The failure of the business may stem from the innovative model of combining a motor finance business and a car dealership under one roof.

In its relatively short history dating back to 1997, Yes Car Credit has been heralded not only as the innovator in the market, but also as a success story. Frustrated by car dealers' inability to recognize the potential of the sub-prime motor finance market, Yes Car Credit was founded with the aim of catering for all aspects of the car buying process away from the point of sale.

After growing rapidly in its early years, Provident acquired the company in December 2002, and under its stewardship its loan book grew rapidly.

Yet Provident's decision to close Yes Car Credit will surprise few in the industry after a dramatic reversal of fortunes in 2005. At mid year, the company announced a GBP6.2 million pre-tax loss and a 25% reduction in sales and it has been suffering trading losses since.

Effectively, the company has had to operate in two fiercely competitive markets, the used car market and the personal lending market, and it is now clear that it was ill equipped to do so successfully. Indeed, one of Yes Car Credit's key rivals, Welcome Car Finance, has also reported significant problems in its forecourt business, reporting a 12% reduction in used car sales in the first half of the year.

To add to the industry's woes, motor finance providers are also reporting a noticeable reduction in payment protection insurance (PPI) income following the introduction of new FSA insurance regulations earlier this year. Considering that PPI accounts for a substantial proportion of income for all lenders, a reduction in sales should be a major cause for concern for motor finance providers, especially considering that their core lending business is also under intense competitive pressure.

Yes Car Credit's recent fortunes were no helped by a BBC expose highlighting dubious sales practices at one of its centers, but depressed market conditions, increased competition and regulatory change have ultimately been the company's undoing.

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