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Finance view worsens

Satisfaction with used car finance houses has hit its lowest level in 10 years among independent motor retailers. And for the first time, relationships have been rated lower by independents than by franchised retailers.

The findings, revealed in the Used Car Finance House Survey 2006 published by Sewells Information & Research, indicate a steady decline in satisfaction.

However, the average overall rating is still above the 75% ‘good’ threshold.

“The time has not yet come to panic. But the trend for the independent sector looks set to register greater despondency in the future and must stand as an unambiguous warning,” says the Sewells report.

“For finance houses serving franchised dealers, too, we would say that now is not the time for complacency.”

Priority for dealers when using a finance house is efficient administration procedures, the speed of turning round proposals, flexibility on deals and the interest rates charged to consumers.

Independent used car dealers value visits by finance house representatives. Satisfaction with visit frequency has fallen below the ‘good’ threshold, as the average visit frequency has extended from every 20 days in 2003 to every 44 days in 2006. The issue is not so concerning to franchised dealers, however, who are largely satisfied with their sector’s average of 21 days.

Finance partners should not expect complete loyalty, in any case. The survey found that 95% of franchised and 86% of independent used car operations have secondary finance houses, which take between a quarter and a third of their business. The secondary finance houses are rated lower than primary, averaging 73.6%, just below the ‘good’ threshold.

Corresponding with the declining satisfaction trend, in the past two years the proportion of dealers seeking to change their used car finance house has risen from 5% to 12%. While business relationships and online submissions have improved, the main areas of concern are the use of call centres, the service levels and support provided by the finance house and the range of financial products.

“With some tightening of credit in the UK over the past year there is bound to be some impact on the financial products being offered. Dealers will have greater expectations of their finance houses as they suffer increasing economic pressures and competition from direct lenders,” states the report.

“With rising interest rates, it is to be expected that the main damage would be inflicted on the more traditional style loans, while those that might appeal during times of financial stress should come to the fore.

“Dealers appreciate low deposit, low interest and extended repayment schemes, while sub prime recorded the lowest rating.”

Franchised dealers’ finance penetration in the new car sector has improved this year. However, the downward trend for penetration for used cars has continued.

The survey shows that F&I managers pay dividends. At dealerships with such staff, used car finance penetration increased to 41% on average, compared to 35.5% penetration at outlets without an F&I manager.

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