With new car sales continuing to grow, and the sale of motor finance (in both the new and used sector) growing at an even faster rate, 2015 has by and large been another successful year for the industry, building on the strong foundations of 2014. Yet challenges remain. Six leading experts offer their opinions on the past 12 months

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Mark Standish, chief executive officer, MotoNovo Finance

2015 has been a very good year for MotoNovo Finance and a very good year for dealer finance, but there’s absolutely no room for complacency. Innovation, fantastic customer service and spreading the word about the motor finance value proposition must be key themes for 2016.

In 2015, we’ve seen new car finance achieve sales penetration levels that were undreamed of a few short years ago. Certainly OEM support has been helpful, but this would be to underestimate the value proposition of dealer finance. Pleasingly, used car finance has also continued to grow, but I’m firmly of the opinion that there remains plenty of scope for growth in the used car sector. However, this will only come about through innovation, a fantastic customer experience and by spreading the word about the value offered by dealer finance.

Reflecting upon 2015, compliance and digitalisation remained key themes, something that will remain true in 2016. More dealers became authorised by the Financial Conduct Authority (FCA) and the first reporting took place. Ensuring compliance is not to be underestimated and the fact that the FCA is currently completing a thematic review of remuneration activities in the broker environment, that will include dealers, points to more changes in the year ahead. Q1/Q2 2016 is the time when the FCA will announce its findings.

In terms of compliance, at MotoNovo, we have once again seized the opportunity to innovate. In December 2015, we launch our all-new Self-Serve service. Available to authorised and non-authorised dealers, the whole concept has been developed in-house and provides a genuinely new approach to dealer finance. Our technology, developed to our specification by developers iVendi, enables customers to create their own finance deal in the showroom. Dealers can still earn an income courtesy of a merchandising payment that will reflect the effectiveness of their site, in much the same way that billboards are priced on their effectiveness. We are excited by this new development and encourage our peers to join us on supplying service to a section of the market that wants to offer finance as a marketing tool, but is uncertain about the full compliance requirements of the FCA. We will take care of all of this.

Looking ahead to 2016, we continue to see a low-inflation, low-interest economy. The potential for increased interest in motor finance is clear and this may create some margin pressure. For this reason, we need to grow used car finance and get the word out to more customers. Right now unsecured loans are growing at a similar rate to used car dealer finance. They are using rate aggressively, but this does not mean we cannot compete effectively. Not all customers will get that headline APR and we continue to believe that acceptance levels for secured dealer finance are much higher than for an unsecured loan.

In the showroom, and increasingly on-line, dealer finance can compete. It is fast, convenient, competitive, has high acceptance rates, and offers a greater level of consumer protection than is enjoyed by an unsecured loan. Now with emerging services such as Self-Serve, customers can also gain a whole new level of control. It’s a message we will be promoting very hard in the year ahead.
In summary, 2015 was very good and we are looking ahead to 2016 with real confidence borne of the investments we have made in our technology, people and products.

Jo Jenner, managing director, Mann Island Finance

finance. Reviewing the hard data, volumes are up for new and used vehicle finance. In a low-interest, low-inflation economy with improving levels of consumer disposable income, we see further growth in the year ahead.

Looking back at 2015, which has been one of strong growth for Mann Island, while the new market continued to make headlines for its overall growth, it’s clear that used sales have also been strong as well. Importantly, the remarketing cycle finally returned to pre-
recession seasonal norms with supply and demand largely in tandem. To date, the volumes of PCP stock coming back to market has found buyers with RVs holding up well. It’s encouraging news across our industry for dealers, manufacturers and finance companies. While it’s true that all finance players want to grow, and certainly we have ambitious plans, it is important that we are prudent in terms of residuals as we move forward. The key to growth in dealer finance is consumer confidence and we must continue to balance short and long-term outcomes.

It’s clear the motor finance market is becoming increasingly busy. New and existing players will be seeking growth into 2016. Certainly, we will be one of them!

Three factors will dominate the development of dealer finance in the year ahead: increasing digitalisation, regulatory development, and a more empowered and confident consumer. We expect to see the parc age continue a slow fall as buyers seek newer cars and the subtle move from ownership to usage will continue. Dealer finance is ideally set to meet this trend, but informing, educating and reassuring customers will increasingly happen online. We expect a significant acceleration and widening of digital dealer finance. This development will be accompanied by increased transparency and control ceded to the customer.

Dealers and their finance partners will need to work even more closely to meet an unstoppable tide of change. Rather than react, we at Mann Island are on the front foot and our plans to support this change are now well advanced. In 2016, we intend to be at the vanguard of helping dealers to meet the inevitable changes ahead.

Philip Nothard, Black Book editor – retail & consumer specialist, CAP HPI

2015 was a record year but not without its problems. With new registrations exceeding 2.6 million, and used vehicle sales hitting
7.5 million, strong demand underpinned a positive market.

Pre-registration played a role in the bumper sales figures, supported by some amazing finance deals. A number of large dealer groups reported PCP penetration as high as 95% on new car sales.

The growing importance of leasing and hire products to retail demand, and increasingly used, is clear. As confidence extends into next year, it will be important to manage the used vehicle supply chain to protect residual values. Manufacturers are acutely aware that the ability to offer a good deal on the front end relies on maintaining residual values.

But every PCP needs a residual value. Every residual value on a used car assumes there will be a used car buyer for it. Without this, PCP doesn’t work. It will be vital for manufacturers and leasing companies to manage the defleet process carefully so as not to distress the market.

Overall, we expect 2016 to be only slightly worse than 2015 in terms of used car price depreciation, as increasing fleet volumes return to the used market, but demand stays relatively healthy. Forced registrations continue to prove a threat for the market.

Rupert Pontin, head of valuations at Glass’s

2015 has been a fascinating year in many ways, not least from the perspective of new car sales. As predicted by Glass’s over a year ago the industry is heading towards a record year with in excess of 2.6 million new car registrations.

Unfortunately there is also an acknowledgment of often prolific pre-registration activity distorting the market. The final figure is likely to be around 5.5% up on 2014 with much of the extra volume a direct result of poor European new car market performance resulting in the need to send more cars to the UK.

What is clear is that without the PCP product and certain other imaginative finance packaging, there is no way that the UK market would have been so productive.

Appealing monthly finance figures based on occasionally ambitious future values have helped thousands of Private buyers take ownership of a new car. With such low monthly payments on new cars there has been some migration of customers from the used car market and to be fair the traditional finance schemes tend to make buying a used car less appealing.

As we understand it, 2016 will see the development of more appealing used car PCP products to redress the balance and help invigorate used car sales in what will become a slightly more challenging market in the coming months.

Roger Gewolb, founder of fairmoney.com

I recall visiting a friend’s office less than 10 years ago and noticing that it was more than a bit overcrowded and scruffy.

So I enquired politely: "How long have you been here?" and he replied: "I know what you’re thinking." and went on to explain that they didn’t have many visitors to their offices, so there was no need to spend large amounts of overhead on attractive premises and facilities.

My friend explained that he was one of the UK’s only "online car finance brokers" and he then demonstrated to me how his business model worked. It seemed pretty confusing and overly-complicated at the time, but, when I returned a year or so later to see him, the model made a great deal more sense.

But would it ever replace the ever-reliable car finance broker, with his fax machine and personal visits? Unlikely, I thought, especially given the recent disappearance of the only online car finance company, OnLine, into GMAC, never to be heard of again, and the quick demise of both Virgin and Tesco Cars (which we all thought were meant to start by shifting the metal, but then get to the serious stuff, the money). There didn’t seem to be a hugely bright future for the online sale of cars or car money in the offing. How wrong I (and many others) were!

Talk about disruptive technologies; the inroads operators like Zuto and CarFinance247 appear to be making are nothing short of astonishing. And there are a raft of imitators and variations coming up quickly.

Another development is the price comparison website (PCW). Until now, car purchase finance has been difficult to sell in general via these sites, but solutions are starting to appear for this as well. Our own PCW FairMoney.com which has, despite its relatively recent arrival, already won some major prizes, itself also needs some upgrades in this area.

Another very important area to watch for I believe concerns the Competition and Markets Authority (CMA) and PCWs. So far the CMA has only introduced rules and legislation affecting payday lenders. That is as far as its remit has been granted.

However, the time could be not all that far off when the principle laid down for payday (which I suggested in a meeting with them several years ago) that every payday lender must advertise on at least one FCA-compliant PCW, is extended to other (and all?) types of loans. This in order to give consumers a fairer and better comparison and choice, and not simply be lured by television bombardment, puppets and the like.

And, one wonders if, to be fair, the rules will not also be extended to lenders who are offline, including High Street shops, in order that the whole market is presented to customers for comparison. If I were a regulator, I guess I would be failing in my duty if I didn’t go for that.

Keith Charlton, Compliance Director, Advantage Finance

In a motor industry where consumer demand is returning to record pre-financial crisis levels, Advantage Finance Ltd has experienced remarkable growth over recent years, and the last 12 months have been no exception.

Here at Advantage we’ve worked hard to consolidate our position as a leading supplier of non-prime motor finance solutions, while ensuring that compliant systems and processes continue to contribute towards the best possible levels of service for both our customers and business introducers.

Without doubt, the key challenge faced by our industry has been managing the changes to UK consumer credit regulation, including an authorisation process that for many firms represents their first real introduction to financial regulation.

The FCA is still in the middle of its own learning journey, and is working to improve its understanding of a diverse consumer credit industry.

Despite hearing many questions relating to the approach that the regulator is likely to undertake in areas such as affordability, remuneration and arrears handling, for us at Advantage it was reassuring to find that it was ‘business as usual’ following the move to the new regulatory regime.

I have no doubt that, providing firms continue to put the interests of their customers at the heart of their business, such questions will answer themselves over time. The overwhelmingly good customer outcomes that motor finance provides are part of an opportunity to demonstrate the real value that our sector provides not only to consumers but to the economy as a whole.