There’s a great deal of talk within the automotive sector around the FCA regulations and the impact that they will have on dealer trading. However, when it comes to finance for cars, the stocking finance for your new and used stock should always be one of your business priorities.
Although bank funding has been easier to access of late, funding is still tough and stock funding is still extremely important to the majority of dealers.
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There are more providers entering or re-entering the market, so it’s vital to review your providers to ensure that you are utilising the best resource available to you. Undertaking a transaction represents a good opportunity to carry out such an analysis.
Ideally you should review the facilities that you have in place on an annual basis. If you haven’t done this before it may be a big task; especially if you don’t have a good understanding of the marketplace.
Whether you have one site or multiple sites, the chances are that you have more than one stocking funder for vehicles already. New car funding tends to be more straightforward simply because any transfer of the business will inevitably have heavy involvement from the manufacturer/agent. It is naturally in their interest to work with the relevant parties to ensure a smooth transition of the new vehicle stock.
However, the process isn’t quite so straightforward with the used stock which can often be with other providers, sometimes linked to retail consumer finance.
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By GlobalDataIdeal time
So, as mentioned above, an ideal time to push this exercise forward is at the point of a fundamental change in the business through a sale or acquisition where the other business already has relationships with other suppliers.
During such a process there are a number of issues that will be open for debate or inspection that are also relevant in a review of your stocking finance provider:
– Vehicle values – this will always be a negotiation point as to transfer at stand-in value or current CAP/Glass’s trade value;
– New stocking finance agreements or amended agreements will be required;
– Renegotiation of pricing, the provider looking to increase and the dealer often trying to gain a better deal for the increased volume;
– Politics around the new vehicle brands being sold;
– An audit of the stock involved;
– Document transfers.
With so many things to think about through a transaction, this approach isn’t always easy. However, as this information is inevitably required as part of the acquisition/disposal process there’s an opportunity to undertake an initial review of your funding with minimal additional work and, importantly, minimal distraction from the transaction or your normal trading.
In our experience, it’s the smart operators who see multiple opportunities, this being just one, out of a scenario such as an acquisition or disposal of a business and many of the best relationships we have found in the automotive sector have come from a pro-active approach such as this.
Kevin Ward, is an automotive industry consultant at Birketts LLP
