NextGear Capital, the US floorplanning business and part of the same parent group as Manheim Remarketing, is to begin stock funding for UK dealerships in 2014 in association with the vehicle auction and valuation group.
John Bailey, chief executive of Manheim across Europe, said more than half of independent used car dealers, the target for NextGear, have "the desire to increase their stock" but were unable to access the funds to do so following the reduction in liquidity since 2008. As such, NextGear would make up for a perceived lack of "significant floorplan providers focussing on serving small-to-medium independent dealers" in the UK.
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Bailey explained the company expected to have dealers joining from February next year with funding beginning in the second quarter. The aim will be to fund 100,000 cars by the end of the first year of trading and 200,000 cars by the second, equal to £150m in receivables.
The announcement was one of several made this week by Manheim, including an add-on to its Seller Advance service and an update to its condition reports for vehicles at auction.
Lending stock
George Grant, director of Special Projects at Manheim, who will lead the roll out of NextGear Capital UK, explained the company would buy both cars and commercial vehicles identified at auction by dealers and then hand over the asset to be sold.
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By GlobalDataNextGear will cover 100% of the wholesale value, which dealers would not have to repay until the car is retailed. The company will be using Manheim’s money, although NextGear is backed by its own treasury operation based in Atlanta.
"We’re not lending money, we’re lending stock," said Grant.
NextGear will not charge interest, but will charge a fixed administration fee, distribution costs and holding costs, which are expected to average £3.90 a day on a £4,000-£5,000 unit, for 45 days.
After 45 days, dealers may apply for extensions to take the holding period up to 105 days. If the unit is not sold, Manheim has suggested they would advise dealers to liquidate the asset by remarketing it through the auction process.
‘Honest and ambitious’
Grant explained Manheim had conducted research with credit reference agency Equifax and marketing company Harris Interactive, among others, to identify dealerships ahead of the application process for the service.
The target market for NextGear will be "honest and ambitious" independent used car dealers selling between 50 and 500 cars each year, estimated to number between 4,000 and 5,000 in the UK.
NextGear will be based in Cheshire to capitalise on the "availability of expertise in the area". It is now hiring 40 employees through CBC Resourcing Solutions.
Further coverage and analysis of Manheim’s announcements will be published in the November issue of Motor Finance magazine.
richard.brown@timetric.com
