He believes specialised motor finance companies like Alphera (BMW Financial Services’ multi-make division) have an advantage.
“We can offer a full suite of products that take into consideration the situation of each car buyer,” said Franks.
“We also work hard with our dealers to provide support beyond the finance products we have on offer.”
Franks said there has been a notable change in the variety of products: “There are more avenues to explore when it comes to buying a car today.”
This expansion of choice was one reason for a decrease in footfall for dealers – the other was that the economic woes meant people were penny pinching more than usual.
Research by Alphera suggests that two-thirds of car buyers are more careful with money than a year ago.
Even so 69% of people asked said they were looking to buy a new car within the next four years.
“This is a clear sign that dealers need to be working on offering the right finance package at the right time,” Franks said.
“Three quarters of car buyers prefer to deal with a person, rather than purchase online, and there’s still plenty of opportunity for dealers to sell more.”
Franks believed Alphera’s dealers recognised the importance of making customers feel they were getting more for their money.
Packaged extras appealed, but each car buyer was different, so packages needed to be flexible.
“Dealers might be suffering due to finance packages available,” he said.
“But finance providers should be able to cater to the needs of their customers, offering products with variety and advice on how best to sell them.”
Chances to close the GAP in aftersales
The economic climate is challenging but offers dealers an opportunity to introduce new F&I products, said Lee Taylor, automotive director for Mondial Assistance UK.
“These include GAP insurance, which delivers protection where there is personal uncertainty,” he said.
“Customers believe they cannot afford this additional cost, but economic uncertainty and the risk to jobs, provides dealers with a chance to introduce it into the sales process.”
Taylor said insurance sales should be central to dealer profitability in lieu of other products.
“The key to successfully selling GAP insurance lies in taking time to fully explain the benefits to customers,” said Taylor.
“Low interest rates mean many customers have used savings to purchase a vehicle and they cannot afford to replace their car if it is written-off.”
Taylor said that to maximise these opportunities dealers should have a robust, multi-sales channel system to make the sales process as simple as possible.
“The system needs to be adaptable for changing regulation, such as ABI guidelines on customer refunds. Mondial Assistance delivers systems that offer dealers the flexibility they need to make the most of every opportunity.”
Darren Greenyer, HPI head of automotive finance, said dealership collapses in the economic
downturn had been fewer than anticipated.
Most that survived had adapted showroom finance to boost aftersales.
“Point-of-sale offers dealers greater opportunities to sell additional products such as GAP insurance,” said Greenyear.
“Marketing finance offerings needs a proactive approach within the dealership and this should be backed by a focused approach to monitoring agreements held by existing and prospective clients.”
Greenyer said the competitive market meant it was important for dealers to focus on their existing customers to secure new vehicle sales and bring added value through aftersales products.
“Many dealers have already adapted to the challenging market by embracing a range of products designed to maximise new sales opportunities,” he said.
F&I 'requires a different focus'
Finance can make a positive difference in generating showroom traffic and closing sales, but it requires a new and different focus, says Carlyle Finance chief executive Mark Standish.
“The car-buying process is changing and it is no good hankering after the way it used to be,” he said.
“My concern is that some people are ignoring the reality of today’s marketplace.”
Standish believes Carlyle leads the industry by providing dealers with a range of innovative new services for web-savvy, budget conscious consumers.
These include MyCarlyle discount shopping, offering customers a chance to offset their car finance payments with discounts of up to 10% in selected high-street stores and shop chains.
“This is the type of innovative thinking the industry needs to make it easier for customers to make a buying decision,” said Standish.
“An average employee takes home £1,088 a year less than two years ago when the sum is adjusted for inflation.
"A fall in real income is meeting significant rises in motoring costs, notably insurance and fuel costs.”
The availability of personal loans remains restricted. Some lenders have introduced lower rates, but usually only for existing customers.
“Decline levels for personal loans are understood to remain high,” he said.
Angela Barrow, managing director of new and used car service plan provider Emac, said the sector was helping dealers to avoid a fall in workshop hours.
“Business managers are
introducing the service plan concept at the sales handover,” she said.
“This ensures service plan sales are not substituted for other F&I products, and provides an opportunity for the service desk to be introduced at an early stage in the customer lifecycle.”
Tim Marlow, owner of Bridford Financial Solutions, which specialises in financing expensive cars, said: “Increasing a dealer’s portfolio of finance products gives them more options to offer customers and ultimately clinch sales, which has to be the priority.”