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CAP Trade Watch: Making capital out of credit squeeze

As used car retail margins are squeezed it remains vital for dealers to secure as much income from aftersales and financial products as possible.

The growth of easy high street credit may be slowing, as the global financial markets continue to wobble, but it has certainly taken a toll on dealers.

The reduction in point of sale finance business has been well documented but it is always worth revisiting to see if the slowdown continues.

Our research among dealers suggests that it remains an ongoing problem, with 41% of used car dealers reporting that their point of sale finance business is down compared with the same point last year.

Around 20% report that business is increased while another 18% suggest they have seen little or no change.

Of those who reported a reduction, the average fall was 31%.

Research into the reasons dealers attribute to the decline suggests that there is a big job to do in persuading customers to give the dealer’s own finance offering a chance before shopping around for other deals.

This is because half of all those dealers questioned said their opportunity to sell finance never even arises because customers have already made their own arrangements.

The need for improved marketing is also highlighted by the second most common answer, which is that customers believe they can get better deals elsewhere.

Dealers clearly have an uphill struggle but this is possibly the ideal time to begin.

Banks and other lenders are tightening their personal loan criteria as the banks grow more jittery.

If the personal credit available in the high street is squeezed too tightly this will have an impact on the used car market as buyers are forced to wait until they can fund their purchase.

But, if customers can be persuaded into the dealership with the promise of reliable funding, there will be strong money to be made not only from the finance product itself but by keeping the market moving in general.

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