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Added value must replace shortfall

Dealers are being urged to focus on maximising sales of warranties, finance and insurance packages after Trade and Industry Secretary Stephen Byers revealed plans to reduce car prices in the UK.

The announcement, which came in the wake of the Competition Commission inquiry into new car prices, is expected to restore consumer confidence in the market by accelerating manufacturer price cuts.

But motor finance company Chartered Trust warns that lower prices will lead to shrinking profit margins for dealers and advises them to look at selling added value services to consumers to make up the shortfall.

Chartered Trust head of development Nigel Williams said: “The new measures will mean that dealers may see their metal profit margins reduce, so it will be even more important for them to focus on their F&I income.

“Earning commission through the sale of point of sale finance, payment protection plans and warranties will offset any such margin reductions.”

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