After years of
upheaval in the point of sale business, it seems dealers finally
need motor finance companies as much as the lenders need
dealers.
Car finance has come a long, long way
from being just a vehicle for commissions – in fact, it is now one
of the best tools dealers have for staying afloat in an extremely
turbulent consumer market.
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Month after month, statistics show the
proportion of the nation’s cars bought through finance increasing.
This quarter, it looks like finance penetration will surpass
pre-scrappage levels, as retailers use finance offers to stimulate
the appetite that consumers lost when the scheme ended.
But dealers aren’t just using finance
to prop up sales in the short term – they are realising the
potential of finance as a customer retention tool.
With the economic picture for the
general public looking dim for some time ahead, they will need to
find as many reasons as they can to get back on the phone to
previous customers.
An existing finance agreement can be a
great excuse to start that conversation.
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By GlobalDataBMW-owned multi-make lender Alphera
knows this only too well, and has been pushing to offer dealers
lead management systems and training, with the aim of getting them
to use finance as a jumping-off point to secure new business.
Sometimes, customer retention is built into the
product itself – as Ian Dewsnap points out in later on in this
issue, PCP (if it isn’t sold on a price proposition alone!) can
offer a steady stream of repeat business years into the future.
But there’s the rub – the product
won’t do its job if it’s sold as a commodity, with the buyer drawn
only to the cheapest deals.
Retailers need to think about how
different products suit customers’ individual needs, and sell them
on that basis.
Personal contract hire (PCH) is
another great example of the need for dealers to find new ways to
think about selling finance. According to many of the UK’s point of
sale lenders and brokers, this product is just waiting for the kind
of renaissance currently being seen with PCP.
This month Motor Finance, in
collaboration with Frontline Solutions, put some of these lenders
and brokers together in a round table discussion, the first of 12
aimed at plotting the future of dealer finance.
One almost unanimous opinion was that
the only thing holding PCH back was the way it is sold – or rather
the way it isn’t.
The reason for this is simple: a PCH
deal doesn’t make dealers as much money as a five-year HP
agreement, regardless of the fact it is easier to sell and that it
almost guarantees repeat custom.
One could well argue that finance’s
primary purpose as a revenue stream went out with the age of fat
commissions. Taking this view, F&I directors should be thinking
of finance as a way of shifting metal and (more importantly) a way
to keep customers coming back for more.
Speaking of which – to keep readers up
to date with developments and trends in the sector, Motor
Finance has launched a weekly news wire to support its
existing print and online service.
Delivering the top stories to your
inbox each Thursday, the wire will ensure you are always up-to-date
on the latest industry developments.
To receive this service, email us at
info@vrlfinancialnews.com today
Fred Crawley
fred.crawley@vrlfinancialnews.com
