Insolvencies in the UK seem to be affecting an increasing number of individuals traditionally with high purchasing power.
Experian’s Q1 analysis revealed a surprising increase in the amount of insolvencies amongst the Alpha Territory group, the most wealthy and influential individuals in the UK.
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In addition to this, figures from Experian’s latest Fraud Index reveal that automotive finance providers experience amongst the highest rate of fraudulent applications of any financial product, with 23 in every 10,000 applications found to be fraudulent in 2011.
Without entering the debate about the snowball effect created by the release of gloomy official data and its effect on businesses and consumer confidence, it is my experience that the overall sentiment and ongoing conversations about economic downturn can affect the way businesses operate and evaluate risk.
Alongside the risks that seem to multiply with challenging economic conditions, car dealers are amongst those feeling the pressure. Since 2005, the decline in used car sales has been almost constant with figures steadily decreasing every year bar one. In 2011, 6.7m used cars were sold; a 10% decrease compared to 2005.
When it comes to running a dealership, there are many additional risks. Figures show one in every three vehicles checked as having some kind of hidden history. These could include inaccurate or misleading vehicle history, incorrect mileage, write-offs, stolen vehicles and cars with outstanding finance.
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By GlobalDataNo matter how long the list of risk factors is, there is a fine line between making informed business decisions and simply turning business away. Using the right data mix to inform those decisions is the key. As well as needing the tools to assess the risks in their business, car dealers can use data to meet their customers’ requirements, meet their commitments for professional diligence and help ease the buying process.
Customers in financial distress, vehicles with a hidden history, and fraudulent applications for car finance can all be easily identified before they develop into issues that could be a threat to your business.
A lot of the dealers we work with want to address these risks but we find, increasingly, they also want to understand the best way continue to do safe and profitable business by managing the risks and driving sales.
According to recent figures, over half a million new cars and nearly three-quarters of a million used cars were sold on finance from motor dealerships in 2011 in the UK . Finance providers have adapted and diversified their finance offering and now take more factors into account when assessing affordability.
Selling cars has become more sophisticated and looking at the automotive sector as a versatile business facing multiple risks and varying customers’ demands is what we aim to do. That way, we are best placed to provide the right solutions to help dealers thrive.
We are renowned for our credit risk management processes with 90% of motor finance providers using one or more of our services but we also understand and can address the other risk factors automotive businesses face.
Ultimately, with challenging economic times comes increased risk. Businesses have to deal with the dilemma of minimising risks whilst maintaining sales momentum.
Identifying these risks, which part of the business they are most likely to affect and the type of consumers or vehicles are most likely to be exposed is critical. With the right tools to truly understand their audience, dealers can adjust their offering accordingly, tailor finance options and address payment problems before they develop therefore not only addressing risks but positively turning them into business opportunities.
Andrew Ballard is director of product and propositions at Experian Automotives
