Dealer Finance is flexible

Dealer offerings are different from high street loans, with the flexibility to tweak packages to suit individual needs, according to Paul Harrison of the FLA.

If a customer is expecting a work promotion, a PCP with its balloon payment is attractive. A bonus at work is an opportunity to put down a bigger deposit on something like a 0% option, and so on.

“What you see on comparison websites is not necessarily what you get once you drill down into details for credit scoring,” he said.

David Johnson at Perrys added: “You will always lose a bit (of business) to high street lenders, but let’s face it, offers don’t get any better than 0% interest.”

Brisk business in ‘near-prime’

There has been brisk activity in what Peter Stewart, of Vertu Motors, described as ‘near-prime’, as opposed to sub-prime, lending.

“Providers are getting good margins without the debt risk of sub-prime.

“Around 30 months ago, we were doing no more than 60 sub-prime deals a month, but now, with near-prime, it’s more than 100 per month.”

Paul Harrison, of the FLA, said the fact that new car sales last year were higher than anyone could have hoped for was largely due to showroom F&I offerings, which not only generated more footfall but also helped compensate for lean margins on the vehicles themselves.

“The profit on new cars is typically 1% or less, compared with up to 15% on F&I, and the dealer is still incentivised by the manufacturer on 0% deals.

“Many customers would find it difficult to get credit from anywhere other than the dealer in the current economic climate,” continued Harrison.

Dealers have plenty to sing about

Marketing consultant Graham Filmer argued that dealers should be singing a good deal louder about their services than the opera character on Gocompare.com

Filmer, who specialises in financial services after a long career with lenders, explained: “Consumer advice pages in both the motoring and general press are forever pointing out that personal loans from High Street lenders are a better bet than dealer-sourced finance.

“However, in many cases, especially in the current climate, this isn’t necessarily true.

"Research by www.moneysupermarket.com last year revealed that only 15 out every 100 people applying for personal loans qualified for the advertised APR and that only 30% of applicants were accepted in all situations.

This compares with acceptance rates for new cars that are commonly in excess of 75% for showroom-sourced finance.

“There is a real opportunity to promote the values of dealer finance – rapid underwriting, high acceptance rates and, for secured finance, higher levels of consumer protection – rather than at best providing product-only information, or a line indicating ‘finance available’.”

Filmer even challenged manufacturers over 0% promotions.

“Such subsidised rates may not be necessary right now.

"With rates for a £5,000 personal loan ranging from 7.8% APR to 20% APR across mainstream lenders, dealer finance has a lot more to offer customers than simply a subsidised rate.”