Dealers are facing a new threat to profit margins as exclusive research reveals the impact on specialist car finance take-up of aggressively low new High Street personal loan rates.
The warning comes from new and used car online distance sales specialist Buyacar.co.uk, which generates consumer sales orders for major franchise dealers.
Buyacar.co.uk has identified a marked slow-down in the take-up of specialist motor finance, despite a month-on-month rise in unit sales from its platform for both new and used cars.
Research among Buyacar.co.uk’s recent cash transaction customers reveals an increase of up to 50% in the number of buyers taking advantage of aggressively positioned High Street loans offering APRs as low as 3.3%.
These figures for specialist finance take-up among Buyacar.co.uk’s consumer customers may signal tougher times ahead for those who rely most heavily on F&I – finance and insurance products – to sustain their unit profitability.
Interviews with consumers paying cash to buy cars from dealers via the Buyacar.co.uk platform also confirms the suspected correlation between recently launched High Street unsecured finance products and a reduction in customers opting for specialist finance.
As an online business, Buyacar.co.uk believes the scale and immediacy of its consumer intelligence makes it highly attuned to seeing trends emerge even before they are revealed in the bricks and mortar market.
Austin Collins, co-founder and managing director of Buyacar.co.uk, said: “Whether our initial research findings among customers opting to take unsecured High Street loans proves to be a blip or the beginning of an unwelcome trend remains to be seen.
“But during January we saw cash transactions rise by 50%, jumping to almost a third of all purchases compared with a more typical proportion of around 20%.
“We have followed this up with customer interviews and the anecdotal evidence does suggest that the new breed of cheap High Street loan products do account for a high proportion of the increase in cash purchases we have seen in recent weeks.
"If this were to turn into a trend it would mean aggressive new High Street loan interest rates pose a fresh risk to the unit profitability of physical and online motor retailers alike.”
Buyacar.co.uk argues that dealer profitability is essential for a healthy new or used car market, stressing that its own online sales model is specifically designed to enable participating dealers to retain 100% of target margin.