Open any industry publication or scroll down a news feed and it is only a matter of time before you come across commentary on how Brexit will affect the UK’s motor industry, or how it could potentially affect automotive finance and insurance. DealTrak’s Martin Hill offers a more practical approach
In the last few months I have read numerous articles that range from fairly positive in outlook to downright depressing.
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One piece that appeared in the days following the referendum result spoke of the “Brexit beast about to be unleashed on the automotive sector”, and warned of wholesale root-and-branch changes to the motor finance market as we know it.
Yet here we are, more than six months after the vote and about to start the process of our departure from the EU via Article 50, and we are still none the wiser.
The opinions of most of us on the subject of Brexit are just that – subjective opinions that in most instances have nothing other than gut feel or hearsay to substantiate them.
This may come as a surprise to some, but of course the fact is that no one knows for certain what will happen in the future as a result of the Brexit vote. Positive or negative? We do not know. Higher interest rates in the near future? No idea – not even the Governor of the Bank of England can tell us.
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By GlobalDataThere will, of course, be those that will try to blame Brexit as the cause of the automotive finance sector’s woes, but in reality there is still plenty that a motor dealer can do to help safeguard its finance and insurance (F&I) performance in an uncertain future.
Firstly, look to consolidate and protect the F&I revenue streams that you currently enjoy – and be sensible about F&I growth aspirations in what will be an uncertain environment in the coming months. Be aware that if things do change then your performance may initially go backwards.
If you do not have a well-honed F&I strategy, then maybe it is worth creating one. Mostly this involves doing the basics well and getting your business in good shape – in other words establishing a firm foundation of motor finance (and insurance) practice that will allow your dealership to be more resilient to any change that might come your way in the future. I believe that examples of this include:
1: Examine your lender panel
Are your finance product providers catering for what will be an uncertain future? For instance, do you have a panel of lenders that can accommodate all types of customer?
2: Construct an insurance strategy, if you are not already doing so
Most dealers are regulated for consumer credit activity, so why not consider introducing a well-thought-out insurance strategy as well?
It offers a chance to maintain a balanced F&I performance that relies on multiple product sales as well as finance rate commissions.
3: Test your FCA systems and controls
Remember that your systems and controls should be fit for purpose and proportional to your business. So test these systems and controls and find out just how embedded within your processes they really are.
Try and do as much as you can with as few IT systems as possible – multiple systems can cause real problems.
4: Make decisions using real-time management information
One thing is for certain: If you cannot analyse the F&I trends within your business then it will be extremely difficult to be proactive and make well-informed business decisions.
Wherever possible, consider adopting a management reporting tool that can provide you with real-time metrics and information as the competitive environment changes.
