If you've been turned down by a manufacturer's or dealer's vehicle funding scheme or have been offered an unattractive finance package all is not lost.
We speak to Ethos Finance and find out how they provide a crucial service to the Taxi, Chauffeur and Executive Private Hire industries.
How can Ethos Finance help?
Ethos acts as a specialist finance broker, helping drivers and operators to raise asset finance at competitive rates. As a broker they are able to approach a number of finance houses so they have a much stronger chance of obtaining a rate.
Its not a "computer says no" approach that many operators will be used to. Their funding partners will go and to see a client in order to make sure they know who they’re lending to. They look at the potential agreement as asset finance, not a car loan. So they take into account what the asset is, and what the business is.
Ethos work with both complicated and straight forward finance options, for individuals and operators, companies and groups - with the aim to assist in the client obtaining their desired vehicle(s) without the need to pay large deposits.
Many operators who are turned down by a manufacturer's or dealers funding scheme will be left at the mercy of banks – who are not lending into certain sectors at the moment.
Ethos' Managing Director and founder Chris Brown says on prestige marques,
We’re looking at maybe a 10% APR. The rate might be higher, but the chauffeur will get the car. While the interest is higher, it’s not massively higher. But there's a massive benefit to cash-flow as the operator won’t have to find a 20% deposit.
How Ethos Finance began
Set up in 2007, the business was created by Chris to help provide funding for the chauffeurs and private hire operators struggling to get accepted for finance by banks and manufacturers.
With experience in the finance industry since leaving school, Chris started out in his hometown of Portsmouth as a bank cashier.
As the business has grown, clients are turning to Ethos for more and more. It’s not exclusively chauffeur finance as with ULEZ coming more and more black taxi drivers are seeking assistance to purchase replacement cabs. We also provide services such as vehicle sourcing.
Are we the only name in town? No - there are others who offer chauffeur funding. But there are not many who understand it as well as we do.
Why Ethos Finance take a different approach
For many operators, even when a deal is agreed, they can find the underwriters – or their computers – simply say no. And when that happens, there’s an opportunity for Ethos.
This means the deal is likely to be structured differently to a low-rate on offer from the manufacturer. Chris has sympathy with the drivers,
Manufacturers' rates may be as low as 2.9% APR, but they want a 20% deposit. And that’s a lot of money when you’re buying a £60,000 car.
He explains the difference in approach,
“We’re funding assets – we look at the business. Manufacturers do it on a credit score.”
Your accounts may be part of the problem
Chris believes poorly presented accounts are a significant reason why many vehicle finance applications are turned down,
When you go to manufacturers they always want to see accounts – and often they are not done properly in this business. Manufacturers tend to look at the operator’s cash-flow, and can spot whether the proprietor’s propping up the business. If that’s what’s happening, it’s likely to be a case of ‘computer says no’.
Finance is becoming the most central issue in a vehicle purchase, to the extent that Chris is now finding that chauffeurs come to Ethos before they even talk to the manufacturer. In some cases, these operators have previously been declined, despite having a sound business. Risk-averse underwriters may have been dissatisfied with the company’s books, or may have noticed an old CCJ from years ago.
For some drivers and operators, the fear of being turned down for finance is so severe that they’ve given up trying. They instead opt to rent a vehicle.
Lots of people in the market are trying to rent out cars. It offers a simple, untraceable, short-term fix that often turns into a long-term fix.
Cars at Coroporate Rates and additional services
Finance for start-ups and those with poor credit records is still a core activity but Ethos has recently added some complimentary services to its offering.
“We're a bigger company now. Originally we were only there to help people who had poor credit, but we can do so much more now.”
CHris explains, "We’re still here to help those who need help—and there are not many we can’t help. But there’s so much more we can do now. We can actually supply the cars at corporate rates, helping out our prime customers as well."
Ethos doesn’t hold stock but the company works closely with dealers and manufacturers’ fleet managers. Chris says,"It’s taken time to get the manufacturers on board, but now Ethos operates as a quasi-official “second supplier” of finance, coming up with deals when the automakers’ in-house finance companies have said no. Some companies don’t like dealing with brokers, but they’re getting their head round the idea that we’re a trade broker. We’re not just doing finance now – we’re taking customers to them." Chris believes detailed market knowledge is the key,
“Because we are known and respected, drivers and operators ring us up and ask for recommendations.”
All is not lost if you've a CCJ
Sometimes drivers or company directors fear their finance application will get turned down for a five year old CCJ,” says Chris. “While that’s a concern, it’s not bad credit.
In some cases chauffeurs are now approaching Ethos before even starting the ball rolling with the manufacturers. Clients are also asking Ethos to source their vehicles as well as the finance – which Chris is happy to do through his contacts at manufacturers and dealers.
One customer had been turned down by Mercedes but had been directed toward Ethos, and Chris was able to finance a Viano. A little later, the same customer said he wanted a BMW 7-series – so Chris called his contacts and sourced a suitable car. When he told the dealer who it was, the dealer told him the customer had also been turned down by BMW's finance. But by working closely with the chauffeur, Chris was able to determine that the company was in good financial health and to reassure a potential finance house. The same client has since ordered another vehicle – so that’s three cars sold to a company that couldn’t get a deal.
Mercedes is under pressure
Vehicle choice is important, though the market is very fluid. And chauffeur market-leader Mercedes-Benz isn’t having it all its own way.
“We have seen a massive uptake in the new BMW 7-series. Many chauffeurs, especially outside outside London, still look at the Mercedes S-Class as the best for comfort. But the 7-series or the Jaguar XJ are cheaper to put on the road, and your customers will still get in!”
He points out that Mercedes remains the king of the chauffeur market but doesn't believe its the be all and end all for small independent as an S-Class isn't necessarily going to get them more work with an S-Class. However for drivers working sub-contractors the S-Class is still likely to be the best option, especially if they're based in town.
Teslas are fully charged
Increasing numbers of chauffeur customers want to go down the electric route with Tesla.
“Electric cars are going to be the future. A customer in Bristol, has taken two Teslas for runs to London
Heathrow and back. He is picking up contracts on basis of having a “green” car, and this has also led to some S-Class work for his company too.”
Another chauffeur operator is picking up hotels work on the south coast with a fleet of four Teslas he says,
“As more Tesla sites and charge points go up, there’s less doubt in customers’ minds."
Not in the market for Ubers or contract hires
One area of the market where Ethos is not getting involved is providing rented Toyota Prius hybrids to Uber drivers.
“We made a conscious decision not to get involved with Uber drivers wanting a Prius.”
Another recent development is a contract hire offer. However only a few chauffeurs are going down the route of off-balance sheet finance.
“I was told it was something we needed but we haven’t seen a massive uptake. Maybe the model has changed and people want to own the cars because residuals are good and there is demand for well looked-after cars.”
So the good news is that there appears to be plenty of options when it comes to vehicle finance for Taxi, Chauffeur and Executive Private Hire drivers, and choice and competition are always positives no matter the industry.
To get in touch with Chris and his team you can email them via the contact us page on the Ethos website or call 0845 900 3877.
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