Mercedes-Benz Financial Services UK has doubled the volume of its vehicle finance since 2009, although mostly in fleet and commerce. Alex Matthews, director of commercial vehicles and direct sales, talks to Grant Collinson and Richard Brown.
Headline success is bringing changes at Mercedes-Benz Financial Services UK (MBFS)and closer ties to the Mercedes-Benz (MB) brand. It moved into the same building as its manufacturer parent last year and is presently phasing out the alternative name of CharterWay.
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MBFS reports to Daimler Financial Services, based in Germany and with a deposit-taking arm known as Mercedes Bank. Financial services is considered one of the "four major pistons", according to director of commercial vehicles and direct sales Alex Matthews, alongside cars, vans, buses and trucks, and contributes 15%-20% of overall profit.
Over a two-year period, MBFS has doubled the amount of vehicle finance, from £152m in 2009 to £305m in 2011, with a concurrent rise in commercial penetration rate from 15% to 30%. Daimler Group global chairman Klaus Entenmann has put the 2012 figure at 40%, or 2.8m vehicles, commercial and retail, worldwide.
Customer breakdown service
In the UK, Matthews explains, there is a renewed sense of making similar penetration in retail car finance. In the commercial model, the major route to market is the Daimler brands dealer network and, within that, the aim for Matthews is to sell more vehicles through finance rather than sell vehicles and afterwards ask the customer about financing.
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By GlobalData"The recession has helped MBFS," he admits. "The competition in the market has dropped somewhat whereas weve remained.
"Weve put our money where our mouth is in the vehicle finance market. Some banks will dip in and out but this is our only market and we are here to support our brand."
Matthews puts the growth in commercial penetration down to a "consistent, superior service" that matches the brand image, but can it be applied to private customers?
"With the big, corporate fleet deals you either win them or you dont so penetration can fluctuate wildly. Retail, because there are so many customers, is a lot more consistent."
There is crossover, however, in light commercial vehicles (LCV), with many MBFS customers one-man-van operations or private consumers of larger Mercedes vehicles.
This has brought with it a shift in finance, Matthews observes. "People are moving away from hire purchase towards a residual value-based product where theyve got flexibility rather than straight hire purchase."
MBFS has seen such products rise by 234% between 2009 and 2011 at a time when LCV sales rose by 168%, with the buying pattern moving from hire purchase to contract purchase, operating lease and full contract hire.
Growth in a time of major lenders absence, coupled with the superior branding honed in the commercial market, has drawn private deals to MBFS, which the company has been only too happy to finance.
"Our approval rate remains above eight out of 10 customers on a retail basis," says Matthews. "For big fleet transactions we havent declined one so far this year."
The next step for MBFS will be expanding that service and that level of finance in to remarketing used vehicles.
"We offer as many financial products on our used vehicles as we do on our new vehicles," says Matthews although, at present the split is "massively in favour of new, Id say 80/20, but we are going to focus more on used sales."
Such an expansion of funding requires an expanding source of money. MBFS UK is able to draw from the Daimler treasury, either directly or by borrowing from the open market, aided by the groups upgrade from BBB+ to A- by credit rating agency Standard & Poors.
MBFS has also converted part of its portfolio into a branch of MB Bank. "We can draw from customer deposits so liquidity has never been an issue for MBFS. That helps us in terms of funding costs and the offer we can give to the customer," says Matthews.
In the UK, the tightening of the MB brand, its finance arm, its mechanics and banking have all helped the company provide finance within an inter-linked corporation model, what Matthews calls the "one-team approach".
One team retail
"Where there are two separate companies, MB UK and MBFS, actually we are the same," he says. "Across our sales teams, we dont have one accountable for manufacturing and one for finance, they do both because we understand it is two sides of the same coin and there is strength to be had in going to market together. The guys in the dealerships need the support of the specialists here."
Matthews adds that having the vehicle teams and finance managers in constant conversation gives MB UK and MBFS "the strength of being able to go right back to the customer, whether finance or the vehicle, with exactly want they want. They dont have to approach different parts of our business."
For him, ideally, the customer is drawn in to the MB dealership from the street by affordable finance offers. From there, the dealer will be financially adept enough to walk the customer through the finance possibilities at the same time as the range of vehicles available to test drive.
"They can test the vehicle, like what they see, come back in and complete the deal with a signature on the vehicle and a signature on the finance.
"Its that ingrained or entwined approach we want. The customer has everything straight away."
The pivot of such a scenario, then, is the dealer and the paradigm for Matthews is "to have every sales person proficient in rolling in finance as just another part of the overall deal, making it an integral part of the sales process because it helps sell more vehicles".
