By Guy Allman, BTC chief executive
The automotive industry is missing out on millions of pounds of revenue. The UK has more drivers on the road than ever before, which can mean one thing – more car sales.
Yet the franchised dealerships are lagging behind the large car supermarkets when it comes to used cars. Our research tells us the average franchised dealer achieves as little as 30-35% finance penetration on used cars. The fact is that they can easily achieve double this when the finance is subsidised by the manufacturer.
The average large used car supermarket, however, achieves at least 70% penetration for their customers and is certainly not offering interest free credit. In fact, finance is offered at very competitive rates.
The question is: what’s different between the franchises and supermarkets? Most dealers will display finance quotations on all new vehicles parked on the showroom floor.
Interestingly, so do used car supermarkets. Furthermore, they quote payment examples in the windscreen of the cars on sale, so customers can better understand what they will be paying. Franchised dealers generally don’t have finance examples displayed on their used cars – so our first suggestion is to fix this with good point of sale.
Worryingly though, the mindset of many used car salespeople across franchised dealerships is that they believe customers will not accept finance at higher rates. Unlike those working in the supermarkets, the staff take a less positive view on finance because of their perception of a high cost of borrowing money. If they think the finance rates are high, they are reluctant to sell finance.
When selling used car finance, salespeople must figure out that a 3-4% increase on the base rate will have little effect on monthly payments.
For a 36 month agreement on a used car, for example, a salesperson might think that an APR of 12% is steep but, in actual fact, it could equate to as little as £7 per week - a small price to pay in a customer’s mind.
As an industry, we need to work on changing the mindsets of salespeople.
BTC already works with franchised dealerships across the country to help them overcome rate objections and focus less on the percentage rate and more on the cash difference from the customer’s point of view.
Salespeople can overcome objections simply by minimising the payments on a weekly, or even, daily basis. An extra £30 per month equates to £1 per day – less than the price of a cup of coffee.
Managers also have a major role to play. We see too many senior level staff neglect to communicate to their sales teams that they should be offering finance to every customer interested in buying a used car. Providing a finance quote – and positively explaining the minimal cash difference – could easily help a customer make a decision that will close the sale.
We often see lazy used car managers allow their salespeople to present a cash balance to change a car when presenting a deal such as “Mr Customer it will only cost you X thousand pounds to change”.
In 99% of these occasions, the customer first asks “how much will you give me for my car?”. A poor salesperson says it doesn’t matter (when it clearly does) and the uncomfortable negotiation process begins.
At best, the customer agrees to buy but, when the salesperson attempts to introduce finance, both lose the will to continue the battle and no finance is sold.
We believe there are some simple measures for dealerships to take to enable them to sell more used car finance.
Have a look at your used car competitors and imitate the good ones. Train your salespeople on cash conversions and how to deal with rate objections. Quote every customer, and use a better point of sale on your used car display.
Used car sales are growing exponentially. It’s time that franchised dealerships stopped lagging behind and started grabbing every opportunity in the automotive industry.
Here’s a challenge. Of the six out of 10 customers who did not take your dealership’s finance, contact 10 after delivery. As a manager of the business you can legitimately ask them if they were happy with the overall experience, but then ask “as a matter of interest” which finance company or bank they used to fund the balance. You may well be shocked at the responses.