The company believes it has a significant amount of work still to do with raising finance penetration at Saab and Chevrolet retailers, and says it does not have the resources to focus on attracting non-GM dealers. Consequently, it no longer offers products under the Online Finance brand, but the operation could be resurrected in the future as the Saab and Chevrolet networks start maturing.
“We will need to keep growing our business,” says GMAC UK managing director Theo Kortland. “But our first ambitions are to grow our business with Saab and Chevrolet, and there will be a lot more activity during 2006. We have separate sales teams to handle these dealers, where F&I awareness is lower.”
It’s a policy mirrored across carmaker finance houses as competition intensifies. Kia Finance, for instance, has created a field force to help its retailers maximise F&I returns and to ensure its finance campaigns are fully explained to the dealer network in terms of target customer profile, key benefits and selling points.
The carmaker has seen enormous growth over recent years in terms of new car sales and consequently finance has become an increasingly important part of the business.
“It’s important to realise the negative effect a subsidised campaign can have on a dealer’s commission earning opportunities and to provide enough flexibility in the campaigns to overcome this,” says Alex Smith, commercial director of Kia Motors UK. “Unless you work to preserve as many earning opportunities as possible, your campaigns won’t get full support, and if they don’t get full support, they won’t increase sales.”
New approach to finance sales
GMAC UK boss Kortland predicts a more competitive product offering for all GMAC brands in 2006 compared with last year, geared towards feeding more revenue back into the network. Interest rates are unlikely to change much over the next six months and Kortland believes new entrants – Santander has launched via the ashes of First National (AM, June 17, 2005) – will increase competition between direct lenders rather than impact on his business.
“It is not all doom and gloom in the UK, but the challenge is to keep the momentum going,” Kortland says.
Two years ago GMAC moved away from the traditional approach of simply offering retail finance to dealers to helping them sell it. ”We changed to work with the retailer because we recognised how important finance was to their business,” says Kortland. “We develop opportunities rather than just giving them the offer to sell. Dealers’ performance is our performance. So we agree a target and agree actions to achieve that target.”
#AM_ART_SPLIT# Dissecting dealer performance
GMAC dissects the dealership performance to assess why different staff achieve different levels of finance sales success. Then it puts in place actions and plans to tackle the poorer performers.
The new approach required more field sales staff and a new structure. Staff now have specific roles as account managers or trainers rather than acting as ‘jack of all trades’. They have two main issues to address: on finance, dealers face customer objections in favour of direct lenders, while on insurance, they face objections by customers who don’t want the product.
“We have products that are better suited to customers than direct lenders’, such as PPP. The problem can be sales staff who are not confident talking about finance, and that’s down to training. We change the process to encourage sales staff to use the finance to sell the car, rather than trying to sell it afterwards,” says Kortland.
GMAC also puts its business managers into the showroom to show the dealer principal what’s possible. Get their buy-in and it is a lot easier to convert their staff, it believes. This practice has been used in the Vauxhall network for the past three years; GMAC now wants to introduce it to the Saab and Chevrolet retail networks.
Retailers taking the lead
Kortland says the GMAC philosophy is not about competing on APRs, but about adding value to the retail network. “We are maintaining a high penetration even when we move away from manufacturer-backed programmes. In the past the level of finance penetration was almost wholly down to what the manufacturer was doing – now it’s down to the retailer.”
Over the period 2003-2005, volumes have risen 19% on new car contracts. Success, from a lower starting point, has been even greater for used cars – Network Q penetration is now 22%.
Kia has seen a resurgence of PCP popularity for small cars together with the extensive use of low or zero rate finance. But Smith believes these deals provide less elasticity on sales than when interest rates were higher at the start of the decade. Direct lenders are still the main competition and the only way to counter this, he says, is to focus on immediate approval.
“Dealers should integrate finance penetration into the sales pitch. People walk through that showroom door with a shopping list and a budget and want to know straight away whether the dealer can meet both before deciding whether they’re going to shop around,” adds Smith.