Paul Munns, motorcycle finance development manager at Santander Consumer Finance, tells Richard Brown how the Spanish bank’s manufacturer tie-in with KTM is just the start of its ambitions for UK bike retail funding.

Aside from Honda Finance Europe and BMW Financial Services, UK motorbike finance is dominated by independents. Multiple brands are offering finance through Black Horse and Close Motor Finance, MotoNovo entered the market at the start of the year and Santander Consumer Finance is now more than 18 months into an agreement with KTM, the Austrian brand originally known for its off-road motorcycles but a comparatively recent entrant to street bikes.

At the helm of the agreement is Paul Munns, motorcycle finance development manager at Santander Consumer Finance and a biker for more than 20 years. Munns has worked to support motor dealer development with point of sale finance since 2003 and joined Santander Consumer Finance in 2009. He was involved in the KTM contract from an early stage and conducted a study of the bike finance market which was presented to the board of the bank. Concluding that specialist support was required for the venture, Munns was given full responsibility for motorcycle finance in 2012, the first full calendar year of the KTM-Santander tie-in, based at Santander’s head offices in Redhill, Surrey.

Munns says his move to the motorcycle sector was motivated by "the ability to combine a passion for bikes with an industry I love to work in.

"Having been involved in selling, promoting or developing financial services, the ability to bring a lifelong hobby into the equation was a dream come true."

Richard Brown: How big is the motorcylce finance market?
It’s growing. As far as bike finance is concerned, it’s still not fully integrated into the current sales process of many motorcycle dealers. Sometimes it is mentioned to customers as an afterthought or only if a low-rate campaign is available. As more dealers become aware of the importance of positioning finance with consumers, they have started to realise the opportunity this brings in terms of selling bikes and income potential.
To help with this, I’ve recently recruited a motorcycle specialist for the South and I am looking to replicate this in the North. The specialists, with their bike sales background, provide bespoke support to our bike dealers and complement our current 50 regional managers who look after our network. As and when more manufacturers come on board, we’ll take on a few more.

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Brown: What attracted Santander Consumer Finance to the market?
Despite being a relatively new venture for us in the UK, Santander Consumer is well established in the motorcycle finance sector throughout Europe.
We were fortunate to have a European contract agreed by our head office in Madrid for KTM. 2012 was our first full year of our partnership under the KTM finance brand. We quickly realised we needed to introduce some dedicated specialism to the motorcycle marketplace.
While the sales process for cars and bikes may be similar, the customer base and the way bikes are used are far more of an emotional subject; hence the reason why we’re in the process of setting up the bike department.

Brown: How have you found the market? How does it differ from car retail finance?
2012 was very much a learning curve for Santander Consumer Finance (UK). We needed to understand the customer mentality. If you’ve ever visited a bike dealership you’ll know it’s a very social environment. There’ll be a burger van outside, a lot of consumers will use the dealer to congregate, maybe on a Sunday morning, for example, pop into the site, have a look around, discuss all things bikes, maybe go out for a ride with friends and then come back. It’s very much used as a meeting point.
We needed to understand it wasn’t the aggressive or in-your-face sales process that car dealerships can sometimes have; it’s more of a relaxed, open environment and we’ve had to adjust our approach accordingly.

Brown: What adjustments have you been making to your approach?
We’re currently implementing various different strategies. Point of sale material we’ve got to grips with. We make point of sale material to suit the bike dealership.
As far as products and services are concerned, we’ve tweaked our current offering on PCP. We’ve taken into consideration the requirements of bike customers. For a sports bike rider, they may only complete a couple of thousand miles a year, so we’ve dropped the annual mileage a customer can stipulate considerably. We also cater for the more adventure/tourer marketplace, allowing a customer to stipulate up to 20,000 miles year, as well. We’re one of the very few finance companies to offer such a tailored approach to mileages on motorcycle PCP.
We’re funding older stock as well because residual values are much stronger on bikes than on cars. As far as other changes are concerned, we’ve completely rebadged our online quoting system to have a more bike-friendly approach. From a KTM perspective, when the dealers log, there’s fully-branded KTM Finance. It’s much more user-friendly.
We’re about to launch funding online, which will enable our dealers to complete the transaction electronically (without the need to fax documents). This will also significantly speed up the whole finance process.
We’re also pioneering a new ‘standalone’ personal loan. When purchasing a bike, customers, will also consider a whole host of accessories, not only for the bike but for themselves: luggage systems, aftermarket exhausts, jackets, trousers, gloves, boots, crash helmets and so on.
Motorcycle technology isn’t standing still. Customers can now purchase all sorts of equipment. Riding jackets that deploy airbags in the event of an accident are now readily available along with helmets with built in Bluetooth capability. Our new loan product will cover these accessories.

Brown: What timescale are you looking at for other manufacturer tie-ins?
Last year we worked with KTM. This year, because of our learning curve, and the adjustments made to our point of sale systems and the back-office processes, we’re much better aligned to look at talking to other manufacturers. If we’re going to be serious about cracking the bike market, rather than knocking on the door of individual dealer sites, it has to be through the manufacturer opportunities. As and when they become available, we’ll sit down with manufacturers. We’re currently havingconversations with one or two.

Brown: Are you looking to increase your dealership tie-ins as well?
Absolutely. At the moment we have a professional field force that can look after our network of car dealers. Also, they go out to support the bike market. Within that field force we have bike enthusiasts and we are looking to build on that in terms of specialism and ultimately form a standalone professional bike team.
The specialists will work alongside the field force and assist the dealers to understand our products and services fully. They will coach and develop sales staff on how to promote dealer funding as effectively as possible. We are attending local and national motorcycle events with our dealers in order to provide ‘hands-on’ support. As and when we take on more sites, we’ll expand the network if required.

Brown: What level of finance penetration are you seeing on bikes?
At the moment it’s quite high on new bikes as, like cars, a lot of them carry a campaign scheme. Used bike finance can be hit and miss. Bike dealers are a little behind car dealers in terms of the importance of finance, particularly what it can earn for them. We’re seeing anything between 19% and 25% finance penetration, so there’s a lot of scope for improvement.

Brown: How do you plan to improve the rate?
From Santander’s point of view, we’re not just set on rates and terms. I think we are a ‘value-added’ service to the dealer network in terms of our professional account managers, assistance with training and development and the products we continue to develop. What we’ve done with cars, and what we expect in the bike market, is to work closely with the dealers that want our support.
Rather than account managers popping their heads around the door now and again, we sit down with the dealer sales team, making sure dealers understand finance, the opportunities finance brings and also our systems and process. These days, finance needs to be seen as an integral part of the sales process and, while there are lots of add-on products the customer can take advantage of post-sale, finance is the means to purchase the bike in the first place.
We’ll work with dealers from our development point of view to make sure they’re fully au fait with out services and processes.

Brown: What’s the difference between motorcycle and car customers? And which bike customers are taking finance?
I first looked at the bike market as a biker myself, from a purely recreational point of view. A bike of often seen as a toy, or a hobby. The type of customer is extremely varied. For example, we’ve seen an increase in young customers who are finding a first car purchase, including insurance, far too expensive. We’ve also seen lots of commuters looking to reduce costs of travel. From a finance perspective once positioned with the customer, many are taking up the opportunity of buying a more expensive bike, taking advantage of some cracking offers.

Brown: Some manufacturers have seen an increase in customers in their 40s and 50s, who come with an understanding of finance. Have you seen something similar?
Absolutely. You could say some people are returning to the bike market, perhaps to relive their youth. This is a strong sector in motorcycle sales as middle-aged customers tend to find themselves with some disposable income. Also, bikes are more expensive these days. It’s quite common for newer bikes to come with ABS and traction control as standard. That’s obviously putting the prices up, as well. When a bike gets to £7,000 to £10,000-plus then, from a purchase point of view, finance needs to be considered. There’s a definite opportunity there as most of the middle-age sector would have used finance in some shape or form.
KTM, for example, launched its new tourer bike, the 1190 Adventure, in March this year and it’s the most technically-advanced bike they’ve produced to date. It has traction control and ABS as standard along with four different riding modes that allow you to adjust a whole host of things including power delivery and suspension settings on the move. With a retail price of £13,095, to me, that just screams: "Finance".
From a PCP point of view, a lot of bikes aren’t doing the miles that cars cover and therefore have strong residual values.

Brown: What else is lined up with KTM?
KTM has got a new campaign lined up called the ‘Orange Days’ campaign. It runs throughout May.
The idea is to attract more customers into the dealers and we’re supporting that. Once customers have booked a test drive and purchased a bike, they can go into a draw to win the value of their bike back.
Santander Consumer Finance is also running various dealer incentives, including tickets to the Formula One British Grand Prix.
Monday 17 June is designated as the official ‘ride to work day’. To mark this occasion, as well as encouraging our staff to ride to work, KTM will be displaying a range of its bikes at our headquarters in Redill. This will allow our office staff to engage fully with the brand.