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Finance dealers endangered

The future for independent retailers selling finance products is growing increasingly uncertain, according to Miles Roberts, managing director at provider Southern Finance.

His belief that this category of dealers “could become an endangered species” is prompted by “the dark spectre of relentless consolidation” among finance companies at global and domestic levels.

Roberts’ theory is simple – fewer lenders offering less support and a restricted range of products means less choice for retailers and reduced scope to generate what has become a vital source of profits.

He cites the recent sale by General Motors of a controlling interest in its GMAC finance arm and the annexation of formerly UK-owned independents by overseas interests as examples.

“Some of the rationalization within the sector is likely to lead to a greater emphasis on the higher volume franchised end of the market at the expense of quality used car operators,” he says.

“It is about choice for the independent retailer and, ultimately, the car buying customer. Ten years ago there were probably 10 independent players, but now you can count them on one hand.”

He adds: “I anticipate at least one other company will be swallowed up or disappear by the end of this year.”

The process, he says, is being accelerated by a “mad rates war” with colleagues among the big league players, backed by the muscle of major financial institutions, confiding that margin is the key to survival rather than volume.

“If everyone is fighting for the same business the margins will be eroded further and consolidation will continue. Independents simply cannot compete in the business of borrowing money like the major groups and manufacturer captives. It would be like feeding my own will.”

Roberts calls for independents to “enhance personal service and flexibility, embrace technology but maintain human links between lenders and dealers. There are alternatives to monolithic, rigid credit scorecard systems.”

  • Southern Finance is talking to companies about establishing predominantly PCP schemes aimed at funding cash-for-car, ex-company car refugees. Miles Roberts aims to exploit an internet car-buying trend among former corporate drivers within the programme.
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