View all newsletters
Receive our newsletter - data, insights and analysis delivered to you
  1. Analysis
April 28, 2011updated 12 Apr 2017 11:52am

Communication in the changing market

In a few years the motor finance industry has moved from feast to famine in terms of funding The response has to be to make better use of whats available, or to find ways to stretch available funding to embrace more vehicles.

By Peter Cooke

Peter Cooke looks at what dealers and finance providers can do to maximise profit.

 

In a few years the motor finance industry has moved from feast to famine in terms of funding. The response has to be to make better use of what’s available, or to find ways to stretch available funding to embrace more vehicles.

Sales have slipped for new units and used units. To the dealer, that means fewer opportunities, unless the vehicle mix can be increased, which is unlikely. At the same time, the base rate has stayed at historically low levels for two years, though it bears little resemblance to the rates which dealers and end-users actually pay.

We need to ask what the finance source can do to assist the dealer in achieving better value from the funds they are willing to commit to the motor trade. We should look at whether finance sources should pursue the same historic mix of end-user customers and products as they pursued three or four years ago.

We need to understand how the market has changed. Not long ago, civil servants were preferred clients. This is less true today, and our approach must reflect this.

We should look for new market segments that have developed recently – whether in magnitude or payment profile terms – which have specific finance requirements. Equally, we should review traditional ‘no-go areas’.

Emerging market opportunities may not be areas that finance sources have traditionally sought. For instance, we should ask whether those who are at risk of losing their jobs, or who may even be out of work, are such a bad risk. Equally, we need to look again at retiring baby boomers. Perhaps new policies are needed, supported by appropriate training.

The message from dealers to finance sources is clear– be in touch with our markets because times are changing. Those markets might not exactly make underwriters jump for joy, but every risk is manageable provided you understand it.

To prioritise the sale of a commodity value-added product, like money, is a challenge when those funds are rationed, yet rates are highly transparent, with increasing numbers of comparison sites.

We must enhance communications. The dealer needs to know what the finance provider wants and how rules and policies are changing. Equally, the finance company needs dealer feedback about what their clients want in terms of borrowing capacity and profile.

The author is professor of automotive management at the University of Buckingham

NEWSLETTER Sign up Tick the boxes of the newsletters you would like to receive. A weekly roundup of the latest news and analysis, sent every Thursday. The industry's most comprehensive news and information delivered every month.
I consent to GlobalData UK Limited collecting my details provided via this form in accordance with the Privacy Policy
SUBSCRIBED

THANK YOU

Thank you for subscribing to Motor Finance Online