MotoNovo claims to have moved towards the Financial Conduct Authority’s (FCA) car finance ideal scenario with the launch of its new “priced to risk” MotoRate offering.

The new product allows dealers to offer an impressive headline APR interest rate and an opportunity to inform customers that the final pricing is based upon their circumstances with no dealer discretion. 

MotoNovo claims that the risk-based MotoRate model is a first-to-market innovation, which was developed with close consideration of the FCA’s consultation on motor finance.

In its findings, published in October last year, the FCA said: “The industry should keep the ability to price for risk and/or offer promotional discounts to consumers when appropriate.”

MotoNovo Finance’s deputy chief executive, Karl Werner, said: “Dealers can move to a flat-rate structure, but doing so could rob them of a significant low headline APR rate opportunity to compete with personal loan providers.

“All of our evidence demonstrates that with MotoRate, dealers can have a low headline rate and a better income platform for the metal and other services courtesy of the new level of online customer control and transparency.

“At a time of reinvention, MotoRate can be a vital addition for positive change.”

Werner said that, while digitisation and regulation were already directing change in dealer finance, the COVID-19 coronavirus pandemic had moved the dial from “high priority” change to “crucial”, with ‘critical’ is probably just around the corner.

MotoNovo said that, even ahead of COVID-19, personal finance trends had made uncomfortable reading for traditional face-to-face financing. They included:

• 79% of people made contactless payments at some point throughout last year
• 7.4 million people are currently living “almost cashless” according to financial institution UK Finance
• 72% now using online banking and 50% using mobile banking

Evolution Funding reported a spike in demand for online car finance early in lockdown, with a 290% rise in customers completing end-to-end, online self-serve finance sales during April.

Last week iVendi said that it had seen online motor finance applications rise by 53% since the period before the Coronavirus lockdown started.

MotoNovo said that COVID-19 was expected to accelerate the move to self-served online personal finance with its transparency and accessibility benefits.

It said that a level of discomfort in changing had been identified by some of the 100 dealers who piloted MotoRate, but with help and support the vast majority made the transition successfully and were beneficiaries of an overall 40% increase in finance penetration and there were other benefits.