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Keeping GAP fair to safeguard its future as a profit centre

Dealers need to adopt even better best practices which are honest and transparent if they are to keep GAP as a vital revenue stream, according to Adrian Foster, director of Remit Showroom which provides F&I training and recruitment services.

Foster will breathe new life into GAP and show dealers how to maintain its popularity and win over public opinion, which is increasingly suspicious of insurance products, when he speaks at AM’s Used Car Market Conference on October 10 at the Ricoh Arena in Coventry.

Foster said: “GAP is both extremely profitable for dealers and a useful product for consumers but dealers need to be mindful of profit versus fair price and find the right balance if it is to continue to figure highly on add-on sales.

“It can be very tempting to make as much money as possible from a single sale which delivers both high margins for the dealership and excellent commission for the sales executive but that kind of strategy is short sighted and dangerously short term. As consumers are much more aware of the products available and their market price, it has become much more important to ensure consistency from price to service is maintained throughout an individual business, franchise or group.

The new Financial Conduct Authority (FCA) has launched an investigation into the value of add-on products, including GAP and Foster believes dealers should be reviewing their F&I processes to make them as open, honest and robust as possible.

In addition, dealers need to understand the implications of commission disclosure and be prepared to face questioning from today’s extensively informed consumer. Foster will explore ways in which dealers can operate a commission disclosure policy and when it is necessary to provide that information to customers.

He added: “All consumers understand businesses will make a profit on all products they sell whether it’s the vehicle itself or the F&I products but, quite rightly, no customer expects to be overcharged.

"By following a consistent F&I policy, dealers will win the trust and respect of customers who are more likely to recommend and refer whether that’s by word-of-mouth, social media or online customer reviews. As consumers make their views on products and businesses more widely known, it will support the sale of F&I products and reduce the likelihood of consumers buying products such as GAP independently.”

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  • max - 21/08/2013 11:59

    All good stuff, but will the industry listen? or will it bury its head and try make hay whilst the sunshines, and let their behaviour help the FCA to kill Gap dead, whilst writting a CMCs charter to bombard the industry with templted complaints?

  • gezza37 - 21/08/2013 17:01

    Yes Max, I think we know the answer to that; the industry will just keep going charging whatever it can get away with. There's too much pressure to make profit from add-ons, that's the problem.

    • max - 22/08/2013 09:55

      @gezza37 - Hopefully dealers are putting lots of this excessive profit away, so they can give it all back to CMC's plus 8% and FOS fess when the storm comes, as surely it will.

    • Rob Chisholm, Applewood Vehicle Finance Ltd - 22/08/2013 10:24

      @max - Slightly different matter to the miss-selling of PPI. Firstly if you have an 'appropriate' product to sell to the Consumer then you are obliged by statute to offer it to that customer. That wasn't the case with PPI when the selling of insurance products was less regulated. The issue really is one of 'price' and 'value', and there is nothing that defines what that is apart from an individuals opinion or gullibility. I know full well though that most dealers are selling the same product at twice the price as that offered by the likes of us in the Leasing Broker market, so it's not strange that we aren't being given the same talking to. £199.00 for a £5k gap, or £249 up to £10k gap for vehicles above £25k in value. Anything more than that is overpriced, and it's the market itself that will kill what is essentially a good product.

    • max - 22/08/2013 13:24

      @Rob Chisholm, Applewood Vehicle Finance Ltd - Not entirely sure what you mean by 'obliged by statute' - but yes I agree it is differant, but not so much so that the CMCs won't go for it, regardless of the validity or not of any potential claim. price/value/excessive profit is todays issue, but the rest will follow. yes it's a good product, but its as we both agree in danger from the very indusrty which wants it.

    • Rob Chisholm, Applewood Vehicle Finance Ltd - 22/08/2013 16:28

      @max - What I meant is that if your are FSA (now FCA), and you'd have to be registered in one way or another to offer such a product, then you MUST offer a product that may benefit a consumer if you have it available irrespective of whetrher or not they have asked for it. To not offer it could land you in big trouble. So for instance, if a client writes off their car and a GAP policy would have benefited them but the vehicle supplier/funder hadn't offered it when they had it available for that consumer then that consumer could make a claim against yourself for their loss.