Amid the doom and gloom, some financial voices are offering shoots of optimism, says Michael McAleer
Motor taxation up. The top rate of Vehicle Registration Tax (VRT) expanded to include cars over 1,900 cc. New EU rules that will force pre-tax prices to rise. Weekly job losses and rumours that the housing bubble is set to burst.
Hardly the sort of economic environment to promote optimisim, particularly if you're in the car industry and involved in lending money with the hope of making profit on the back of ever tighter interest rates. Perhaps it's only to be expected that the main lenders for car finance would be pushing a more optimistic line, trying to talk up the industry.
Comments are littered with references to full employment, low interest rates and suggestions that the media are ignoring the good news for the bad. It's not hard to see why. Even the voice of the industry, the Society of the Irish Motor Industry (SIMI) is busy campaigning about the penal taxation levied on motorists.
Yet Chris Hanlon, managing director of Permanent TSB Finance, doesn't conform to the downbeat viewpoint. Despite the banking tradition of stringent conservatism, he's predicting car sales topping 250,000 by 2007.
So why is Hanlon putting his money on 2007? "I reckon we can reach 250,000 cars by 2007, thanks to a mix of cars being sold on the back of the usual three-year cycle, the money coming out of the Special Saving Investment Scheme."
Yet he can't be simply dismissed as someone trying to put a gloss on the current situation. For example, he disagrees with the current industry campaign against Vehicle Registration Tax (VRT). "I support a system of low central taxation and I don't see why the guy on the street should have a hard time subsidising my new car. If I want to buy a new car it's my decision and someone else shouldn't have to pay for it."
What's more, amid continuing dour predictions of price rises due to new EU rules and price harmonisation, he suggests these are only a minor blip in the market, predicting that prices are actually likely to fall over the next five years.
"Economies of scale are at play even on the Irish market. Take Opel for example. They currently operate five separate marketing zones within the EU. If we become a proper single market they could operate it all as one zone, resulting in significant savings."
His bullish predictions of the future may of course be driven by the fact that with 90 per cent of Irish cars purchased with finance or loans, such rapid growth offers mouthwatering potential for lenders.
But it's not just the car industry itself that is recording change. In the arena of car finance, several new players have entered the market in the last decade, some concentrating on particular segments or technologies.
Three main options exist for those seeking car finance: the High Street branch, the dealer network, and via the Internet.
Permanent TSB policy is to straddle the market, offering a mix of high street, dealer and online facilities. Hanlon highlights the opportunities offered by new technologies. "The quickest deal we processed was in 28 seconds at an Opel dealership offering zero per cent finance."
Other lenders are concentrating on the distinct market segments, with the banks using their High Street branch networks to offer loans, while the likes of GE Capital and Bank of Scotland concentrate on point-of-sale loans.
Bank of Scotland has in the past 12 months set up a dedicated motor loan subsidiary offering finance through approved various SIMI dealers, so that customers can sort out the finance and drive away with the car as quickly as possible.
Managing director Frank Donnellan says the Bank of Scotland's operation now claims a market share of 25 per cent. According to Donnellan, point-of-sale finance "provides the customer with an alternative service of funding at fixed rates - an important consideration in an environment where rates are set to rise."
However, Hanlon is not so fearful of interest rate rises. He's confident that rates will not rise dramatically, barring some major shock. As to concerns about rising bad debts, Hanlon claims these are being exaggerated. "There's been no serious deterioration in bad debts in the last 10 years and they've averaged around 1 per cent, though of course as business grows that 1 per cent represents a larger number of people." In most instances he says, it's not bad loans but personal circumstances that leads to cars being repossessed.
So, as we prepare for New Year sales, it seems lenders are gearing themselves up for some promising years ahead.