Lending changes will make asset finance ‘easier field to play in’

According to the managing director, in the two years since the asset finance division of Pepper has been running, the company has lent over $1 billion to 40,000 customers, and aims to build this to $100 million a month over the next few years.

He added that this number could be easily achieved if more mortgage brokers take up asset finance, especially vehicle finance, which he forecasts could become a reality this year. 

He explained: “I think a lot of brokers don’t go into it because they think it’s either too small, or too much of a pain for them to do, or too hard. It’s not, if they educate themselves on it then they will find it’s a very lucrative and natural area for them to extend into. They just need to educate themselves more…

“In the last year ASIC has been handing out big fines to funders [who were] not asking the right questions to the consumer with regard to their income expenses… it was looking at responsible lending [and was also] focused on commissions, in particular a commission program called flex commission, which is prevalent in motor dealers and consumer finance brokers.

“The legislation probably won’t change this year, but businesses will need to adjust this year for when the change does occur next year. I think that will make for much more transparent pricing and probably will create great opportunity for the mortgage brokers to do a lot of that business. I think [pricing] will become much more homogenous and transparent, and I think that it will make it an easier field for [mortgage brokers] to play in.”

However, although Mr Campbell suggested that asset finance could be an attractive area for mortgage brokers to break into, he reiterated calls from CAFBA that brokers don’t undertake more than they can handle.

He said: “I think there is much greater opportunity for mortgage brokers to do the consumer asset finance… small ticket asset finance under $100,000 is pretty straightforward, but once you get over that it starts to get a bit more complex for small business and then that becomes the preserve of the specialist equipment finance broker. 

“If you're doing a car loan for a waged salary owner or a car loan who runs a news agency or an SME, it's not that much harder. But if you do it for a $250,000 bulldozer for an earth-moving company then that has a much higher degree of complexity and I agree that that should be left to specialist asset and equipment financiers.

“But, from a mortgage broker's point of view, if you think every house they finance will have at least two cars in it, and they’re turning them over every three or four years, for their 1,000 customers that’s 600 opportunities a year (or 50 a month).”

He concluded: “Most importantly, if [mortgage brokers] aren’t doing it for their customers, someone else will. So, it’s not just an income stream, it’s also a defensive measure in terms of protecting their client. On the other side of the coin, today’s renters buying a car are tomorrow’s home buyers, so it is also an offensive strategy too – if you’re writing the car loans for a client then they would likely come back to you for a home loan.

“But, I think there is much greater opportunity for mortgage brokers to do the consumer asset finance and cars for small business.”

[Related: Association warns brokers of asset finance complexity]