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Finance analysis comment: Brave new world for point-of-sale finance

As we hurtle towards the end of the year, it’s worth reflecting on the past 12 months and taking a look towards 2009.

Massive changes have impacted on our industry during 2008, which saw motor sales fall dramatically – it shows no signs of relenting in 2009.

I am aware of the cyclical trends in our business, particularly as motor finance has been through a period where profits have been skewed in favour of dealers.

With the significant changes in the credit market and, in particular, the need for finance providers to fully price in their risk and cost of capital, we are seeing a return to a more balanced position.

This means there is a greater need for dealers and finance providers to work together more closely to address the challenging issues ahead. 

However, it’s not all doom and gloom. There are encouraging signs that point of sale (PoS) is staging a comeback.

It was recently reported that dealer finance penetration for new cars has risen from 46.2% to 50.9% over the 12 months to August.

A big challenge for dealers will be persuading their customers that PoS finance is a very attractive alternative to a high street loan. It is crucial to convince customers that credit has risen across the board.

During these tough times, reputations and relationships are key, and dealers should be comforted in dealing with a trusted market leader like Black Horse. 

Innovative approaches to marketing finance, such as our Rate for Risk model, ensure that PoS is not just for ‘elite’ customers and opens it up to a wider audience. 

To exploit current opportunities, dealers must sell PoS finance assertively and focus on developing customer relationships. Customers should be drawn to the overall benefits of PoS finance, rather than simply focusing on the rate.

I genuinely believe this gives us cause for optimism in the year ahead. Only by working together with dealers to offer the consultative support, products and services which fit with today’s marketplace, can we hope to lay the foundations for a more profitable 2009. 

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