This February, the rolling 12-month total of new cars financed by members of the Finance and Leasing Association (FLA) by consumers in dealerships passed the one-million mark for the first time.
In 2015, 81.4% of private customers funded their new car purchase through dealer finance, up 10% year on year, while used car finance grew 9%, according to the FLA.
The trend for growth is continuing – point-of-sale consumer new car finance business grew 27% by value and 22% by volume in February, compared with the same month a year earlier.
Dealers’ adherence to the Financial Conduct Authority’s (FCA) regulations looms large over the point-of-sale finance process in the showroom. As the majority of retailers have got to grips with meeting compliance with FCA regulations, the spotlight is moving from authorisation to enforcement.
Kirk Franks, Alphera head of national sales, said: “The FCA changes have meant quite a lot of processes have changed at the point of sale.
“Dealers have to be really prudent, but it can only be seen as a positive. The sale process has become much more focused now, it gives customers more transparency.”
Karl Werner, MotoNovo Finance divisional chief executive of motor, acknowledged that while dealers need to make sure everything they do is compliant, there is still pressure on sales and margins and still a threat from third-party finance.
He said: “We must keep our ‘foot to the floor’ if we are to expand dealer finance’s value.
“Central to the development of finance will be taking market share from direct, supermarket and high street lenders.
“Already, secure dealer finance can offer competitive pricing, affordability, flexibility, high acceptance rates and a higher level of consumer protection than unsecured loans.”
Werner said this message has to come across to prospective customers in the showroom.
He said: “We must also keep the offer easy to access; fresh and compelling, demonstrating through both the products and finance-buying experiences that customers can get the ‘good outcome’ mandated by FCA compliance.”
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Automotive Management Online