After a storming first four months of the year, motor retailers probably could have done without the announcement of a general election. History tells us it will mean a slowdown in retail trade across the board but particularly in 'big ticket' items such as cars.
There is no logic to this – just simply that an election campaign proves to be a distraction and the uncertainty it creates makes customers more nervous about spending their money. Even though the result of this election appears to be a foregone conclusion, most industry analysts are expecting a temporary lull in the current demand for both new and used vehicles.
In fact a slight lull may not be such a bad thing. It will give time to draw breath and think ahead to the challenges of the summer – how to maintain the sales momentum over July and August, how to make the most of the new registration plate format in September and how to increase finance penetration in the face of the continuing challenge from direct lenders.
Generally customers are becoming more educated and expectations about service levels and their ability to successfully negotiate discounts in the showrooms are increasing. Add to this the changes in the growth and impact of direct lenders and it is clear dealers are coming under increasing pressure from customers.
The direct lenders recognise this and are quick to react.
Headline APR rates have dropped as low as 7.9% in some cases and it is hard to ignore the 8.2% which is apparently available while you stand in the queue at a supermarket checkout.
Against figures such as these, motor dealers run the risk of looking uncompetitive and so losing business. Of course, the reality is that dealers can be competitive at the more realistic loan rates that apply for the majority of car loans. Look behind the headlines and you soon find all is not what it seems. Low rates are only available on large loans over longer terms and low rates are only available to a tightly controlled group of customers with strong credit ratings.
Although personal loans can be arranged over the phone, it does not mean the money is available to use instantly. Loan agreements have to be signed and returned, cheques posted and cleared – it all takes time. Using high technology systems from Lloyds UDT and Chartered Trust, dealers can arrange finance within minutes and, in many cases, enable the customer to drive away with the car of their choice.
And, perhaps most persuasive of all, dealers can make cars affordable by offering finance products which are simply not available to the banks.
Personal Contract Purchase schemes with a guaranteed residual value underwrite the risk for the customer, make the car more affordable and offer the potential of repeat business for dealers.
The challenge for dealers is to get across the message that finance from the point of sale is the best option for many customers. Here at Lloyds UDT and Chartered Trust we have a wide range of training schemes and sales aids to help you. The objective is to reduce the number of walk-ins carrying their own finance agreement before they even reach your door.