Andy Tong looks
back at the events of what has been a difficult year, especially
for small and medium-sized dealers
Well, here we are at the end of another
year, and 2009 has proved to be a real bitch. Even as I pen this
piece I am reading about the loss of Lythgoe group – very sad.
We have said goodbye to a number of small and
medium dealer groups, and even the mighty wobbled, with Pendragon
shares tumbling to an eye-watering low, and the other big PLC
players having to rein it all in for the sake of the P&L.
A rich vein of skills and experience has also been
lost, perhaps forever, by the departure from the industry of key
managers, brokers and specialists who have lost confidence in the
sector, or just plain lost their jobs.
I am sure you, like me, have read many articles
over the past 12 months addressing where we are, who got us here,
and lots of people claiming that ‘it would never have happened on
Everyone has an opinion, and of course a villain to
blame for the mess we’re all in, and whilst some of these
soothsayers and gurus claim to have the answer, I have learned that
most of them don’t.
I have discovered in 2009 that many people cleverer
than me who have secured an MBA or similar seem to believe that
with their qualification comes a healthy dollop of telepathy, an
instant and comprehensive understanding of the intricacies of our
industry, and the absolute ability to be right all the time, and
thus enter our market as expert consultants.
They are, in the main, as deluded as my Aunty Pat,
who thought she was Napoleon most weekends. If you need help, you
get someone who has actually done the job, not someone who has read
about it in a course manual and bought a paperback of Henry Ford
A year to forget?
As an industry we have been exposed to a
considerable beating this year. The sector looks fragmented and
patchy, and its confidence is very flaky in many places. The vacuum
left by independent dealers and groups that took the decision to
turn the lights off this year will of course recover in time, but
there are more serious issues affecting our industry – such as the
loss of key people to other sectors, and, as I said at the
Motor Finance Europe conference back in March, the loss of
many highly experienced broker staff.
There is nothing more disheartening than dealers
having stock, footfall and deals, only to falter at the last hurdle
because no-one will fund the customer. Many dealers have told me
this year that customers are rate-sensitive; well, let me assure
you that those customers who claim they are rate-aware are rapidly
learning that there is no-one queuing up to offer them funds.
The big four banks are terrified of risk, and their
average APR rate for personal loans has gone from 10.4 percent in
January 2009 to 17.2 percent.
We as an industry need to sit down with our funding
partners and explain to them that with a personal loan their parent
bank carries all the risk of the lend, of course along with all the
associated profit, cutting dealer, broker and the asset funder out
of the loop.
If the parent bank could share that risk and some
of the profits of the lend, via their own internal asset finance
teams, then our finance partners would find their treasury channels
more open to lending, the market would relax, and more deals would
As an industry, we need action without hierarchy.
Financiers and dealers need to roll their cuffs up and get stuck in
to resolving the problems of our industry. We have a VAT impact on
our ability to deal coming in January: are we ready for that? What
about further changes to the Consumer Credit Act, and the
inevitable revisions to block exemption?
Scrappage is a sticking plaster that has a short
shelf-life. Of course it has generated activity and sales – but
these deals are often one-time only, and most of the cars sold
under it, I suspect, will be run into the ground for the next 12
years, as their knackered old part-exchanges indicate.
So here is a proposal: dealers and funders, sit
down over a cup of PG’s finest and a Jaffa Cake, understand that
one can’t thrive without the other, and acknowledge that this
fragmented industry could be put back together very easily with
some effort and a healthy serving of trust.
Funders, to exist you need to lend, but instead of
stressing about risk, quantify it, find ways to share it with
dealers, and both parties will do more business.
You have a revenue stream, as does the introducer,
and let’s be honest, 50 percent of something is much better than
100 percent of sweet FA.
The author is director of Profit