GAP sales are starting to recover following an initial slump that resulted from the introduction of new regulations from the Financial Conduct Authority (FCA) on September 1.
According to Dealerweb there was an immediate 11% year-on-year reduction in sales of guaranteed asset protection in September following the introduction of the new GAP rules.
However, sales have since recovered, says the provider of showroom management systems, with an estimated 30% of new- and used-car buyers now opting for a GAP policy – on a par with the average monthly GAP sales before the regulations were introduced.
The findings are the result of a nationwide analysis by Dealerweb.
It compared the volume of GAP sales achieved by the franchised dealer networks of 12 leading volume and prestige car manufacturers.
James Hill, sales operations director at Dealerweb, said: “There are signs that GAP policy margins are under pressure as dealers seek to maintain sales volumes. The average price of transactions has fallen by an average 5.4% during the first two months of 2016, compared to the same period last year.”
Under the new regulations, dealers are now required to outline details of a GAP insurance policy at the earliest possible point in the sales process, then leave two days as a ‘cool-down’ period before concluding the sale of a policy – giving consumers the opportunity to shop around.
Businesses must also provide information advising consumers that they are able to source a GAP product from elsewhere.
“It’s now six months since the introduction of the FCA’s new regulations, but the rule changes don’t appear to have affected the popularity of GAP policies in the longer term,” said Hill.
“Not only have sales bounced back, but – assuming dealers are fulfilling the FCA’s requirements – one could speculate that dealers are building an even higher level of trust with buyers, earlier in the sales process.
“The more upfront and detailed disclosure of all relevant policy information is perhaps resulting in a greater inclination by customers to transact a GAP agreement.
“The only area of concern for dealers is the average GAP policy sale price, which has fallen slightly compared to the same period in 2015.
“Buyers are using the cool-down period to shop around and this is inevitably placing downwards pressure on dealers’ GAP margins. Sales teams can counter this with effective sales processes driven by a proven showroom management system.”