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Exclusive: BMW FS reveals plans to reduce dealer finance rate further

AM: Huge emphasis is being placed on consistent customer service processes and outcomes in the new FCA regime.

But there seems to be an inherent friction generated when you place it against the manufacturer turning on, and turning off the margin ‘taps’ or volume bonuses, dependent almost on the time of the month, which generates an entirely different set of behaviours than the one being advocated by the regulator and now BMW Financial Services.

It doesn’t seem to sit very easily in a dealership when you’re being told that you must sell with the customer outcomes front and centre, until the end of the month, when you’ve got to shift units to meet volume targets. The behaviours then can be very different.  How does that sit with you?

SH: The basic raison d'être for a motor finance company is to help sell cars, so you can’t separate the two.  The strategy of putting a customer first is not a financial services strategy for BMW, it’s a BMW Group strategy. We have quarterly tactical campaigns on the BMW side of the business, but it’s moving towards six-monthly and annual tactical campaigns in the Mini. 

The view of our network already, as you say, is that they don’t like the fact that these tactical programmes change regularly. I think if you looked at our last four quarters on BMW, the changes have been very small. We already have a very clear ambition of making the tactical programmes consistent and long-term, and that’s motivated by making it easier for the customer to manage.

We have a campaign on pretty much all of our cars. The only cars we don’t have campaigns on are X5, X3 and the M cars, and that’s because we don’t get enough of those to satisfy customer demand.  But dealers are still selling those cars at rates similar to campaign levels, because the new car customers expect that in the BMW brand.  But consistency is something we’re already aware of as important from the point of view of the customer experience. I don’t think there’s any way to compare manufacturers easily, but you’d see ours have been pretty consistent for a very long time.



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Comments

  • Steve Boucher - 05/12/2014 17:03

    It's interesting to see that the new BMW Finance advertised rate of 10.9% is higher than the average rate BMW dealers have been charging - could someone explain how this is putting customers first? I appreciate that dealers can discount down the rate, but if you are 'treating customers fairly', shouldn't you be offering all of your customers the lowest discounted rate?

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    • Vauxwagen - 06/12/2014 21:16

      @Steve Boucher - Unfortunately most of the industry can't seem to get their heads around TCF. TCF isn't about offering every customer an identical rate and product. It's about offering products that are appropriate to the customers needs and requirements. Different rates create competition (from the manufacturers, dealers, banks, the direct lenders etc) which also means customers are more likely to be treated fairly, as they can always say no. Good qualify qualification, should ensure that customers are offered appropriate products. If one customer is offered a 10.9 APR with a free service contract and another is offered 7.9 APR without a service contract, who is being treated fairly? Well both of them as long as the products are appropriate. Offering a customer a 4 year Contract Hire agreement, when they have told the dealer, that they change every 2 years isn't treating a customer fairly (unless they understand that they won't be able to change at 2 years). TCF is about being clear, open, honest, transparent and ensuring the customer understands what they are buying?

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    • Steve Boucher - 08/12/2014 09:06

      @Vauxwagen - There are elements of every deal which are open to negotiation - the FCA are only concerned (at the moment) with finance and insurance sales. Their question is 'why should one person be offered a lower interest rate than another?' Unless the lender is using risk-based criteria to make their decision, there is no reason.

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  • jim smith - 05/12/2014 17:27

    These statements from BMW bear little resemblance to what is actually happening in the market place. Customer's are APR driven currently, with many quoting Direct Lender APR i.e. sub 5%. Perhaps the BMW showroom receives few such customers, but the mid market brands certainly do. One final point - virtually every manufacturer answers PCP - now what is the question !!

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    • DJB - 08/12/2014 17:51

      @jim smith - The idea that you can get sub 5% APR from direct lenders is not true in most cases. UNLESS they are doing an equity draw down on the house. By the time the customer has applied, the rate will have shifted to over 10% easily in most cases. The rate they offer is not the rate that they get. By this time the customer will have gone through the process so will stick with the rate offered. It's up to the Dealership to get that message across to the customer and do a little research on market rates...

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  • R Patel - 09/02/2015 08:33

    This is great and I have seen that starting rate when I made a purchase recently. But there are dealers that use alternative finance house such as Black Horse (Lloyds) and their starting off rates are above 10.9. Should customers specifically walk into a dealer, ask only for BMW finance and start there? I tried that with one dealer and despite their usual blurb about finance houses were quite insistent on using Blackhorse, for whatever reason they veered away from BMW FS. Perhaps they get a better commission from other finance houses rather than BMW FS, but after reading this article it makes sense now. BMW should also think about dealers changing their policy of not emailing out a quote, that still bemuses me considering all quotes must be put in writing first. Some do it but the majority don't. I was once told that all calls are recorded and that lives as proof of the verbal quote. Well done to BMW for taking this step now get the dealers to improve their service levels, particularly on the financing side.

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