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Finance insight: More programmes, more dissatisfaction

Finance houses that this year launch programmes to fight back against competition from direct and high-street lenders must also contend with widespread dissatisfaction among dealers.

The Sewells Used Car Finance House survey 2006 reveals the areas where independent lenders are failing to provide the level of support demanded by motor retailers.

“The survey has revealed another dramatic rise in the number of dealers willing to abandon their primary houses – up from 5% in 2004 to 9% in 2005, and to 12% in 2006,” it says.

This means the desire to change principal finance house is now identical for franchised and independent used car dealers. But why?

Sewells delved deeper into the overall average satisfaction ratings. These were in six broad groups: finance products, service levels, support, call centres, online computer systems and business relationships.

Online computer systems offer the most encouragement, with three in four respondents awarding a score in the survey. Sewells comments: “Finance houses must conclude that online systems are working well, but more dealers need to be encouraged to take them up.”

Most dealers asked had an opinion about the remaining groups (products, service, support and relationships). Service attracted the most responses, and Sewells observes: “A substantial fall here would be grave: service is clearly crucial to the dealer/financial provider relationship.”

Sewells suggests there is no common strategy among finance companies. It evaluates the findings relating to individual finance houses: Honda Finance on an upward trend, Nissan Finance falling back, and Black Horse and Capital Bank “both on the descent, suggesting a less than creative approach”.

#AM_ART_SPLIT# BMW has apparently recovered from three successive falls, “which implies it is employing a more innovative approach to products”.

The only dramatic turn in fortunes was at The Funding Corporation, “although it still lags well behind, and the sample was small”.

For all finance houses, says Sewells, a tightening of credit last year (2006) is bound to have had some impact on financial products offered.

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

During times of economic uncertainty, dealers require a sensitive response from finance houses. For franchised dealers, flexibility on deals is top priority after coming third in 2005 and fourth in 2006.

Speed approving proposals became the second most important priority (it was sixth the previous year). “Closely related”, says Sewells, “is administrative efficiency of HQ in third place.”

For independent dealers, speed turning proposals is the top priority.

Sewells says: “In contrast to franchised dealers, independents are more reliant on finance house representatives, and placed this factor in third place.”

In 2005, attitude/expertise was the 14th priority.

With these findings in mind, major independent finance houses have fresh ideas to reinvigorate the sector.

Black Horse Motor Finance expects to see the benefit of its LetsUconnect programme following a six-month pilot with 400 dealers.

Black Horse is promising to give dealers complete control over every aspect of their finance business, giving staff more time to sell by reducing the time taken on administration.

This month, Capital Bank Motor is planning to host a dealer forum at the Bank of Scotland’s corporate head office in Edinburgh.

Peter Cottle, director at Capital Bank Motor, says he wants to listen to industry views on motor finance to help shape his business.

GE Money Motor Finance has put a great deal of effort into improving every element of its business over the past 18 months, according to chief executive Brendan Devine.

This year, Devine says, GE Money’s focus will be on providing a fast quality service for dealers. “And we must not underestimate the importance of relationships and value building in the showroom,” he adds.

#AM_ART_SPLIT# Independent finance houses are proving strong

Independent finance houses are healthy and ambitious, according to the Sewells Information & Research Used Car Finance House survey 2006.

Black Horse Motor Finance is the most dominant, with 28% of the market, but the sector is highly fragmented. Capital Bank Motor (15%) and GE Money Motor Finance (10%) provide the main challenge, and sales were boosted in 2003/2004 by Abbey National’s closure of First National Motor Finance.

The ‘others’ line in the graph represents 75 independent finance providers and brokers named by respondents to Sewells’ survey. More than half of the mentions were for seven independents: Barclaycard Motor Loans, Carlyle Finance, Close Motor Finance, Northridge NIIB, Santander Consumer, Southern Finance and Welcome Finance.

“It is interesting to note the entry of Santander Consumer, a subsidiary of the Spanish bank that took over Abbey National in 2003,” says the survey.

Dealers also named 31 vehicle manufacturer finance houses. Those taking the largest share of used car finance in 2006 were Ford (7.3%), VW (6.0%), GMAC (5.3%), PSA (3.9%), BMW (3.4%) and Toyota (2.0%).

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