Dealers looking to reduce the number of lenders they work with has been a recent trend, with two main factors driving it, one relating to regulation in the market and the other an increase in finance companies.
Dealers now increasingly look to have more control over showroom processes and specific customer outcomes. Although they realise that having multiple lender options is important for their customers, we find that dealers prefer to stick with just a few of the main lenders, based on longer-standing relationships and product offerings. Changes to regulation in this area also means that many dealers feel these processes will become more complicated the more lenders they deal with. This is especially true in franchised dealerships, where there are manufacturer controls and processes to satisfy – in addition to those set by lenders – to comply with regulation. By narrowing the scope of lenders they have on their books, they can simplify showroom processes rather than adapting to varying requirements.
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There has been significant growth in the number of finance companies and brokers in the market, which are offering varying deals that have challenged the traditional motor finance companies. We have seen many smaller independent dealerships, for instance, look towards these new lenders due to their attractive finance offering. However, the existing relationships and support offered by lenders to the dealer is extremely important. Longevity, which breeds familiarity and therefore an understanding of the dealer’s business, also plays an important role, which is why we are now seeing many dealerships reverting back to their known and trusted providers.
We believe that the best way of mitigating risk is in having a good relationship with finance partners. Dealer-to-lender relationships are at the heart of our business model, and we always aim to provide a bespoke and personalised service to dealerships, using the knowledge we have of their business to create the finance packages that they need to drive business growth. This is something that should be integral to any finance provider’s business model.
It is therefore all about picking the right partners, rather than a large number of them. Motor dealers need finance models which are most appropriate for their customers’ needs, so it is important that they have access to flexible models. Lenders who don’t offer these different processes risk limiting the options available for their dealer partners.
We produce a UK Dealer Satisfaction Survey monthly which helps us track sentiment and pinpoint areas that dealers value most. Out of a maximum score of five, dealers rated Close Brothers Motor Finance 4.73 for consistent service and 4 for generating more business. Dealerships also rated dealer-to-lender relationship management 4.63, underlining the bespoke service that traditional motor finance companies offer in a crowded market.
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By GlobalDataIn addition the Customer Satisfaction Index showed that customers were 86.3% satisfied with their relationship with us, compared to the average rating of 77.4% from banks and other building societies.
Face-to-face dealership support is crucial, and understanding the dealers and their specific challenges and opportunities should allow a lender to service the dealer in a way that supports the growth of their business. Dealers reducing the number of finance providers they work with should be able to deepen the relationship with the partners they have, and therefore see better results.
❙ Author Paul Kaye is sales and marketing director at Close Brothers Motor Finance
