Used car dealer finance can break through into the finance mainstream as we enter life beyond lockdown, MotoNovo Finance chief executive Mark Standish believes.
In a rapidly changing and increasingly online retailing environment, dealer finance could prove a popular choice amongst consumers, as long as the industry succeeds in winning the “hearts and minds” of consumers, alongside “addressing some of the deep-seated perceptions of the industry,” Standish adds.
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According to a statement from MotoNovo, the motor industry has long had a problematic relationship with consumer media regarding used car dealer finance, with the press leaning towards personal loans as a safer and cheaper option.
Two principal consumer guidance websites – The Money Advice Service and Which? Car Finance both argue in favour of personal loans. The former advises customers: “If you’re not paying with cash, you’ll be using car finance or credit to buy your car. If you’re using credit, you’ll get the best deals if you have a good credit score.”
Referring to added-value insurance product, Which? writes: “These products are more cheaply bought independently.”
Guidance from the two influential publications reinforces both the challenges and opportunities for dealers in terms of motor finance.
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By GlobalDataFollowing the introduction of new motor finance regulation, which saw a move towards risk-based pricing, Standish understands the difficulties dealers face in embracing the new model. In spite of this, Standish deems the original model as unsustainable.
In a previous statement, Standish reinforced: “While change can present risks, in this case, the risks of not changing, even in the short term, looked far higher. From a regulatory, technical and above all customer perspective, we concluded that for the future well-being of dealer finance, the connection between the borrower and their risk profile had to be recognised.
“Over the last year, we have seen the pace of change. I earnestly believe we can turn this to our advantage by improving perceptions and sales with risk-based pricing. Fixed-rate finance is an option, but at the interest rates I see on dealer websites, I doubt the model can survive for long and doing so risks sustaining the negative perceptions of our industry.”
