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Call on government to encourage more financing of electric cars with a guarantee scheme

The government has been urged to introduce a loan guarantee scheme to help boost the number of electric and hybrid vehicles sold.

The Motor Finance team at specialist lender Paragon believes an Enterprise Finance Guarantee (EFG) could help the advancement of alternative fuel vehicles (AFVs) after its research showed sales of these vehicles were being hampered by limited finance options.

Latest findings from Paragon’s Headlight Survey for Autumn/Winter 2018-19, which gathers views from the UK’s largest motor finance brokers, highlights issues securing finance for AFVs.

Nearly three quarters of brokers expected an increase in both hybrid and electric car sales in the coming six months yet around a quarter of brokers said they had difficulty organising finance for electric cars.

Due to the technology involved with electric cars constantly being updated, there is a huge amount of risk in terms of valuation and merchandise complaints. An Enterprise Finance Guarantee by the government would mean that lenders could take a view on where residual value would be and the government would stand the loss beyond that.

Julian Rance, Director of Motor Finance at Paragon, said:

AFVs are clearly growing in popularity as 72% of brokers said they dealt with electric cars on a quarterly or more frequent basis. This throws open the question on how much quicker electric car sales and development would grow if funders could get more comfortable with this type of vehicle at a time when manufacturers are still improving the technology and battery life.

What we need is the government to step up to the plate when it comes to electric cars and the pollution agenda.

If it is serious about outlawing the sales of new cars or vans powered solely by a petrol or diesel engine from 2040 as part of its Road to Zero strategy, then the government also needs to help fund AFV vehicles through a scheme like an Enterprise Finance Guarantee.

Lenders need some form of financial guarantee for these cars and we are happy to take risks, but only to a certain point. This partial guarantee could make a real difference.

Enterprise Finance Guarantee loans have previously helped small businesses as part of a government scheme in the UK.

5 February 2019

Paragon Bank PLC is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority. Registered in England number 05390593. Registered office 51 Homer Road, Solihull, West Midlands B91 3QJ. Paragon Bank PLC is registered on the Financial Services Register under the firm reference number 604551