Writing about bikes for 20 years. Published in dozens of titles on five continents. Mildly obsessed with discovering how things work.
The social upheaval seen over the last few weeks is unprecedented, with a fog of confusion and anxiety setting across the country due to the fast-changing situation. But despite the changes, bills still need to be paid and for many that includes a monthly HP or PCP outgoing for their bike.
Whether you’re seeing business dry up due to the coronavirus or you’ve been forced to take time off to care for kids now that schools have been closed, or even if you’re self-isolating or suffering from Coronavirus, there’s a good chance that financial worries are being added to the general anxiety.
The first rule is simple; communicate. Explain the situation to your finance company rather than simply missing payments and there’s a good chance they’ll work with you to find a solution.
Black Horse, which is the leading vehicle finance company in the UK, already appreciates that many normally-reliable customers might be seeing cash flow problems due to the virus, and has updated its website to address the issue.
Suzuki, which uses Black Horse to operate its finance schemes, said: “Our customer’s peace of mind is a top priority for Suzuki Finance and we have implemented special measures to support customers impacted by Covid-19. If the income of a customer has been affected by the disruption of coronavirus, we have a range of options to help including payment deferrals, along with additional support if required.”
Honda’s stance was explained like this: “As a responsible lender authorised by the Financial Conduct Authority, we are watching the current situation closely and understand that many of our customers will be directly or indirectly affected by COVID-19. All lenders during this challenging time are required under FCA rules to work with their customers to arrive at an arrangement that is in the interests of fair and appropriate customer outcomes.
“We encourage all customers to make early contact with us and any other lenders if they are experiencing financial difficulty so that a suitable solution can be discussed which is appropriately tailored to your circumstances. Other organisations like the Money Advice Service may also be a good source of information and support.”
If you’ve taken out a personal loan, help may also be at hand. A number of lenders including Bank of Scotland, First Direct, Halifax, HSBC, Lloyds, NatWest, RBS and Santander are offering payment holiday. Many are also waiving fees for missed payments during the crisis.
If you’re more than halfway through a PCP deal, there’s also the option of ‘voluntary termination’ – whereby you simply hand the bike back and bring the deal to an end.
The Financial Conduct Authority (FCA) has announced a proposed package of measures aimed at reducing the financial strain caused by the coronavirus shutdown – and it includes the idea of a three-month freeze on vehicle payments.
As well as targeting payday loans, pawnbrokers and buy-now-pay-later schemes, today’s proposal addresses vehicle financing, saying: “The FCA expects firms to provide a 3-month payment freeze to customers who are having temporary difficulties meeting finance or leasing payments due to coronavirus. If customers are experiencing temporary financial difficulties due to coronavirus, firms should not take steps to end the agreement or repossess the vehicle.”
In guidance issued to vehicle financers, the FCA says that firms should provide “exceptional and immediate support to customers facing payment difficulties due to circumstances arising out of coronavirus” and that it will review the guidance in three months’ time. The FCA will now consult with finance firms and finalise the proposals by 24 April, with the intention of bringing the new rules into force soon after that.
The rules are aimed specifically at people hitting short-term financial problems due to the coronavirus crisis rather than those who were already in trouble with their payments. The FCA’s guidance says: “An example of a situation in which a payment deferral may be appropriate is where there is or will be a temporary reduction in household income that would have otherwise been used to make finance or leasing payments.”
Under the proposal, interest will continue to accrue during the three-month payment deferral period.
Christopher Woolard, interim Chief Executive at the FCA, said: “We are very aware of the continued struggle people are facing as a result of the pandemic. These measures build on the interventions we announced last week, and will provide much needed relief to consumers during these difficult times.
“We have tailored our measures to specific products. For most of these proposals, firms and consumers should consider the amount of interest which may build up, and balance this against the need for immediate temporary support. If a payment freeze isn’t in the customer’s interests, firms should offer an alternative solution, potentially including the waiving of interest and charges or rescheduling the term of the loan.”
The FCA’s latest proposal also addresses the situation of customers reaching the end of PCP deals during the crisis, saying: “Firms should not change customer contracts in a way that is unfair. For example, firms should not try to use temporary depreciation of car prices caused by the coronavirus situation to recalculate Personal Contract Purchase (PCP) balloon payments at the end of the term. We will expect firms to act fairly where terms are adjusted.
“Where a customer wishes to keep their vehicle at the end of their PCP agreement, but does not have the cash to cover the balloon payment due to coronavirus-related financial difficulties, firms should work with the customer to find an appropriate solution.”
Those whose income hasn’t been threatened by the coronavirus pandemic might be on the other end of the scale, considering taking advantage of record low interest rates. The Bank of England cut the base rate to a mere 0.1% on 19th March in an effort to stimulate the economy.
In theory the result will be cheap deals passed on to consumers, with low-interest finance and loans. The PCP deals that have become the normal way to buy bikes in recent years have been largely driven by low interest rates since 2008 financial crash, and even lower rates should make them cheaper still.
However, while the low Bank of England base rate might lead to lower interest rates for PCP or HP deals, lenders may also become increasingly wary if large numbers of people start to default on loans due to the crisis.