2024-03-13 15:00:16
A European directive to submit the LOA to the APR
Until now, the LOA allowed you to rent a new or used vehicle with the possibility, but not the obligation, of purchasing it in the long term. An attractive model for those who wish to regularly change cars without the constraints of ownership. But now, Brussels has decided to change the rules of the game in October 2023 by voting for new regulations. The LOA is not a credit like any other. Beyond vehicle financing, certain contracts include additional services such as warranty or vehicle maintenance and they also take into account the risk on the residual value of the vehicle.
The European directive intends to subject the LOA to a calculation of the Global Annual Effective Rate (APR), thus integrating the total cost of credit. With the introduction of the APR, which, we remind you, is recalculated every quarter by the Banque de France, the LOA will be subject to the usury threshold (maximum interest rate at which a bank can no longer lend). And who says wear rate says increase in financing costs. The LOA will therefore be less attractive, but also less accessible for low-income households, since the wear ceiling is set at 7,35% for a consumer credit of 6,000 euros.
Looking for balanced enforcement
The transition to a new regulatory framework for LOA will not be without consequences, as we have mentioned, for motorists, but also for the automobile market. For professionals in the sector, it is the very profitability of the LOA that is at stake. “ We are not opposed to the application of a wear rate, but it must be adapted to the activity », emphasized Frédéric Jacob-Peron, president of the Association of Financial Companies (ASF), during an interview with our colleagues from Les Echos.
The fears of players in the automotive sector are all the more justified as the European directive provides for a withdrawal period of 14 days for the purchaser of a car under the LOA. Enough to discourage banks from granting a loan and put professionals in the sector in a very delicate position, since this removes any short or medium term perspective from them. To give an order of magnitude, LOA represents 87% of financing of new vehicles by individuals and 28% of used vehicles, and its outstanding amount reached 7 billion euros in 2023. The European directive will be transposed into French law by November 2025, with entry into force planned for 2026. However, the automotive sector and the French authorities are not throwing in the towel. The latter are trying to find a balanced implementation of this new regulation. The ASF therefore advocates the creation of a wear rate specific to the LOA, which would make it possible to maintain protection for consumers, while preserving the attractiveness of the LOA.
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