Yes Car Credit closes with loss of 820 jobs

Yes Car Credit, best known for selling used cars to those with poor credit records, has been closed with the loss of 820 jobs.

Staff at its 28 showrooms across the country and at its Horsham head office, Sussex, were told yesterday that the parent company, Provident Financial, had failed to sell the business and, in the light of an expected £24m loss for 2005, had decided to shut it. Provident paid £77m for the company in December 2002.

The firm, which was the subject of an exposé by the BBC's Whistleblower programme, struggled to shrug off adverse publicity concerning the quality of its cars and selling techniques.

Provident Financial's chief executive, Robin Ashton, blamed competitive trading in the used-car market and new financial rules that made it more time-consuming to sell insurance products. He said: "There's never a good time to close a business, but we had to act quickly."

Yes Car said it was offering employees an enhanced redundancy package, beyond normal statutory entitlements.

Provident said shutting it down would cost about £141m, comprising £91m of goodwill, closure costs of £30m and asset write-downs of £20m. The investment bank Keefe, Bruyette & Woods said this amounted to a second profits-warning within six months.

Yes Car specialised in selling used cars on finance packages to buyers who had been rejected for credit by other dealers or the banks. Most buyers put down a small deposit and paid the rest over three or five years. Yes Car typically charged 19.9% APR and higher rates to those with the worst credit records. It also made much of its income from selling high-margin insurance policies and warranties.

Mr Ashton said: "The business had been losing substantial sums since 2004, mostly due to substantial changes in the used car market. Other dealers started targeting the sub-prime market [those with poor credit] and this undoubtedly affected our business. If you look at ... dealers such as Reg Vardy, they are now catering specially for the sub-prime market."

He also suggested that new rules introduced by the Financial Services Authority this year meant buyers were less likely to buy insurance products.

Mr Ashton played down yesterday the effect of BBC Whistleblower programme aired in March, which showed an undercover reporter working at the firm. The programme showed buyers being promised cars that had undergone a 125-point safety inspection but claimed mechanics were passing cars for sale without any checks. One, referring to the checklist, was filmed telling the reporter: "I just tick anything. Fuck it, I don't care."

Undercover reporters claimed sales staff were trained to lie to customers, and a manager was filmed telling staff not to offer buyers a seven-day exchange and warned they would be "terminated" if they did. The BBC said it had received a thousand complaints about the firm.

Last summer the company brought in a new management team to try to turn around the business. In September, Provident announced a strategic review of the business and as recently as last Friday it was in negotiations to sell the business.

Chris Johnstone, managing director of Provident's UK consumer credit division, will be leaving the group by mutual agreement when the closure of Yes Car Credit is complete. Provident's shares closed almost 7% down yesterday at 559p.

Anyone who bought, or agreed to, buy a car from Yes Car is unaffected by its closure. The company said it would honour all deals, those with outstanding finance will pay it off as before, and all warranties will be honoured.