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Car dealers ‘must avoid being locked in with carmakers’ structured finance products'

By Tony Willard

Automotive retail lenders are urging dealers to retain some control in September’s 63-plate market while making the most of buyers being driven into showrooms by manufacturers’ national campaigns.

James Broadhead, Close Motor Finance managing director, said dealers could be locked in with carmakers’ structured finance products.

James Broadhead, Close Motor Finance managing director  

“Control could be taken away from dealers to market vehicles individually,” he said. “Where manufacturer offers don’t cover certain models, dealers should work with specialist lenders to provide finance packages tailored to their needs, and those of customers. Lenders must be able to offer a complementary range of terms to preserve dealers’ income.”

Andy Gruber, Alphera Financial Services UK director, expects growth in September’s new and used car markets. “Dealers will probably feel locked in with carmakers’ structured finance products for new vehicles,” he said.

“There is, though, a strong opportunity for them, with specialist lenders’ finance products, for used vehicles.”

Gruber said the right finance products could attract customers scared off by more traditional and less flexible finance options.

“The right PCP will make the car of choice more affordable for customers,” he said.

Broker Mann Island has launched Campaign 63. Director John Hughes said 45 development managers would, by the end of September, each deliver 63 sessions to advise dealers on coaching, marketing and phone call techniques.

Hughes said: “Many September finance sales will be based on price. It has its place, but we aim to take finance to a new level, delivering a service experience that creates sales and long-term dealer loyalty.”

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  • ABC123 - 05/09/2013 12:53

    The reason to lock in with a manufacturer (MF) is the additional support they can apply once the customer comes around to renew. AND you'll get your customer back again. Additionally - they can can identify and market these customers ahead of renewal point and will support with additional marketing spend if required to change customer early. The white labels won't have that spend, and generally their non supported GMFV's will be lower, and the interest rates higher in most cases than MF supported PCP. Also, a few white label finance companies have associations with manufacturers / banks, and you will be lucky to see that customer again - as in a lot of cases they are re marketed to brand / bank products at point of renewal. As for used sales, there are loads of providers outside of MF finance, but alot of MF used car finance offers can be tied into volume bonus targets incorporated into new VB targets - so there is still a good income source. In summary - nothing wrong with being "locked in" with MF finance products.

  • Steve - 05/09/2013 15:31

    I wonder what BMW FS would say if his Alphera (BMW FS's "independent" finance company) Sales channel partner prospected his BMW Dealer customers!!! I am not sure if this is just an advert for independent Finance companies! The OEM captives do a great job for new and used vehicles; the independents want to good quality (credit) business which manifests itself from franchised dealers. This is a perenial challenge...

    • ABC123 - 05/09/2013 15:36

      @Steve - Agreed, it is an advert - and not a great one at that - all finance products have a structure - it's not unique to Indi's...

    • ABC123 - 05/09/2013 15:36

      @Steve - Agreed, it is an advert - and not a great one at that - all finance products have a structure - it's not unique to Indi's...

  • gezza37 - 05/09/2013 16:55

    It's adverts for carmakers structured finance products that drive customers into dealerships to buy cars. Why wouldn't they want to be locked in with them as it makes selling cars a little bit easier!! On used cars using BMW finance as an example, their GMFVs are mainly stronger than independents so the payment is usually better for the customer unless the independent rate is really low and then the income falls. Don't know what Mr Gruber means by "more traditional and less flexible finance options", there is only really HP and PCP!

  • Travis1 - 05/09/2013 21:13

    Folks, I think some of you need to read the article again. Broadhead clearly states "Where manufacturers DON'T cover certain models..." Therefore, there is still an opportunity with these customers who haven't come into the dealership on the back of a low rate/low payment offer. Look at your finance pen on models that have offers against them, I'm seeing 70-100% across most volume brands but then look at your finance pen when models aren't covered by manufacture offers. If it's less then 30% then you're losing opportunities and your sales teams have are losing the art of selling rate on new cars. Furthermore, these manufacturer schemes are now creeping into the used car market with many of them offering same terms for pre-reg and approved used car which can compound the situation further. I totally agree that manufacturer schemes drive footfall, create additional opportunities to do business and give us long-term renewal opportunities but if we consider other options into the wider picture, rate spread will be a dying art!

    • Steve - 05/09/2013 21:35

      @Travis1 - I accept rate spread and the skill of selling rate is a dying art but with brokers and small finance companies trying to sell plp versus pcp with fixed margins this is the way this market is going on new prestige marks where subventions isn't offered. The problem with this it leads to many other problems, brokers selling to retail customers and forgetting to say the payment (I mean rental!!!) includes vat!!! The point is this new car finance pen for most oem's with subvention programmes oscillates anywhere between 50 - 80%...of course all can find examples where different. Good captives achieve in the region of 30 - 40% used car pen and independents scrap to bring that figure up to 50%... I see no radical movement in finance selling since the mid late 80's at dealerships. The advent of used pcp had some small impact but this invariably doesn't have the same retention rates as new car pcp sells? From data I have seen, due to poor selling of used pcp with some independent finance houses having (quite frankly) ridiculous gmfv's and having no resell equity positions...great debate and good luck in September to all - captives and independents...!!!

    • ABC123 - 06/09/2013 13:01

      @Travis1 - I read the article fully - the non covered models is not how this article was introduced and presented - the title is "must avoid being locked in with carmakers’ structured finance products" and it is this that I was referencing.