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Danger ahead for car dealers who ignore credit law changes


By Tony Willard

Automotive lenders are urging dealers to grasp new opportunities in 2015, while warning of dangers ahead for those who fail to react to change.

Gerald Grimes, managing director at Hitachi Capital Consumer Finance, said: “This will be a pivotal year as dealers begin to capitalise on opportunities presented by the FCA’s new regulatory regime.

“The importance of finance to consumers will continue to grow as the key factor in determining a sale. Consumers are increasingly seeking easier ways to buy cars and the right finance package helps to turn browsers into buyers.”

Hitachi research suggests one in four dealers see more than 75% of new car sales linked to finance, with more than 55% believing used sales will follow the same trend.

Karl Werner, head of sales and marketing at MotoNovo, said: “Perhaps the biggest change will be a cultural one. Antiquated practices will need to adequately place customer needs ahead of all others. If they do it right, we think dealers can increase finance sales.”

MotoNovo is part of the FCA’s introducer appointed representative scheme. “This will provide dealers with income without becoming authorised and give their customers access to finance,” he said.


FCA changes 'deeper than car dealers think'

“The range of changes required by the FCA is wide, and deeper than many dealers seem to perceive,” said Werner. He said these included commission disclosure and the requirement to offer the customer only the rate advertised ‘unless their credit record is impaired’.

“That will create some consternation,” said Werner. “It removes the capacity for dealers to vary a loan rate as part of an overall package where the alteration is for their gain, rather than in the best interests of the customer.”

“The cultural elements of providing a ‘good customer outcome’ are most challenging. Dealers will need to ensure they have procedures to provide evidence. This change impacts areas such as how sales personnel are rewarded.”

James Broadhead, managing director at Close Brothers Motor Finance, said his company was trying to assist smaller groups with FCA authorisation. “They are the core of our business and need to remember that if the product is good, and they communicate transparently with customers, all will be well.”

Close, voted 2014 vehicle finance provider by the National Association of Commercial Finance Brokers, has introduced an e-click sign-off for dealer customers taking their loans. “People expect that now, rather than being confronted with a fistful of documents,” said Broadhead.

Julian Rance, head of Paragon Car Finance, believes lenders and dealers will work more closely to support used car sales as new car registrations begin to plateau. “To meet FCA requirements, dealers will need to capture customers’ income details routinely to assist lenders with affordability assessments,” he said.

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