For many manufacturers, partnering with an independent lender makes sense for their finance option. Jonathan Minter speaks to providers about how the system works

Since the recession, it has been no secret that finance has become increasingly important to selling cars, and over the past 12 months in the UK more than 80% of all new cars sold have involved some form of finance.

In other words, for a modern brand looking either to grow or maintain its market share in the UK, having a competitive finance package is absolutely vital.

While for volume manufacturers the answer has generally been to create a captive subsidiary to take care of the finance side of things, for smaller or more niche brands the regulatory and back office costs often may prove prohibitive. In these cases a white-label agreement might prove a better option.

When talking to lenders about white-labels, one word comes up more than virtually any other: "partnership". It’s clear that, for lenders at least, a successful white-label agreement invariably involves a successful partnership between the two organisations.

Nick May, head of premium captives at Alphera Financial Services, even goes so far as to say the phrase ‘white-labelling’ often undersells the work that organisations like Alphera put into working with its partners.

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Instead, he says: "Our approach is one of true partnership to deliver a comprehensive and compelling customer service which meets the exacting demands of these brands’ prestige customer base."

May’s comments are mirrored by those of Nagla Thabet, head of franchise and leisure at Black Horse, who describes partnerships as "key" to white-labels.

These partnerships, she says, need to be underpinned by a mutual interest from both parties where they can see the benefit of working together in areas such as supporting business expansion and growth, a move into new markets, or the development of new products.

Again, May says something similar: "Clearly, when it comes to setting up a white-label partnership, it’s important to recognise the amount of investment that will be required from day one.

"It’s essential to have champions in both organisations to ensure that the project receives the attention it requires, while rolling out major system changes can require a degree of flexibility and the ability to respond to changing circumstances with a positive attitude."

In Ireland, the white-label market is dominated by one player, the Bank of Ireland (BoI), which provides the finance for 14 manufacturer and distributor partners. Here the situation is a bit different, due to the vast majority of independent finance providers withdrawing from the market in the recession.

Speaking to Motor Finance, Pat Creed, managing director of BoI, says his bank had a number of companies on its books which it had built up over a long period of time before the recession hit Ireland in 2009/10, at which point all of BoI’s competitors left the market.

At this point, he says: "We weren’t really just pitching for white-labels, we were just the only bank left standing, so they fell into our tent.

"It doesn’t mean they fell in at any price, but we were the only funder left in the market, so we were their only option,"
While the recession may have provided the bank with a number of opportunities to create new agreements with manufacturers and distributors, the bank has made sure it did not take its success for granted, and since the recession has had to retender a number of times, and won each case.

Running so many franchises is not without its challenges. "The biggest challenge is managing all the different competing issues which they have," Creed says.

He adds: "They’re all big competitors of one another out there, and we’re the common denominator across a lot of them. So it’s managing the confidentiality, managing different schemes, and managing different programmes.

"If one manufacturer comes up with something innovative, we’ve got to be careful that we don’t replicate that across the others, though they will come looking for it at some stage."

While BoI keeps a level of confidentiality between its various partners, once an innovation or new product is in the market, it’s not uncommon for the other partners to request something similar.

When asked about differentiating propositions between different OEMs, Thabet notes that, in the main, finance products are similar across all of Black Horse’s businesses.

While finance provider and manufacturer will generally aim towards a common goal (using finance to sell more cars), inevitably there will be some disagreements.

According to Thabet: "As a rule of thumb, we need to agree that we may occasionally disagree. There are parallels here with making any partnership or relationship work – you could even compare it to marriage!

"We need to approach disagreement in a positive manner, always trying to reach an acceptable outcome through well-balanced discussions. The best decisions are ordinarily reached through healthy debate and sharing different perspectives."

Part of the problem can come from the fact that the manufacturer and the finance house might have slightly different demands, management styles or an imbalance in the levels of expertise or resources to support new developments.

One example of these slight differences can be with PCP. In the UK, PCP accounted for around 80% of all new car finance in 2015, and has continued to grow as a proportion of the market in 2016. It is also being used in an increasing number of used car finance agreements.

PCP has also become increasingly popular in Ireland, and at the Motor Finance Europe Conference 2016 in April, Creed told delegates how PCP was powering the Irish motor market’s recovery.

The danger with PCP is that such a product can be sold badly. Creed says: "We all need to make sure no one is doing anything stupid, particularly around minimum future guaranteed values (MGFVs). They’re called that for a reason: the focus is on the word ‘minimum’. The danger is if someone starts putting those MGFVs up too high and customers are not left with the equity they require to make the product next time round."

This can be one area where a white-label might have to push back on manufacturer demands, as Creed says OEMs and Irish distributors sometimes ask for higher MGFVs.

"This is where we have to fight back and say: ‘no, this is not the right thing to do for the product’," Creed says.
In the UK, the motor finance market has spent much of the past few years preparing for, and going through, the Financial Conduct Authority authorisation process.

In many cases this involved making changes to process and procedures, which have needed to be imbedded in intermediary networks. For this to go smoothly with manufacturing partners, Thabet says clear and regular communication is key.

Communication is also key because motor finance is generally evolving quickly. Alphera’s May, who works with premium OEMs, says a number of changes in the premium sector are helping to shape the offer Alphera provides.

"As genuine partners with the manufacturers, we are able to deliver a service that is completely bespoke. The trend is towards an even more customer-centric approach, which complements the relationship of the retailer with the customer."

The ability of white-label finance providers to help manufacturers evolve and react to the market is not just limited to the premium sector.

Thabet notes that Black Horse has to adapt in order to move with manufacturers.

"Where it works well is when we combine our efforts and proactively identify future opportunities to meet any changes in customer or market demands and be on the front foot to deliver ahead of competition," she adds.

When it comes to actually differentiating between products, Thabet acknowledges the financial products are similar across the business, however she says the lender works in close partnership with most manufacturers to understand any change in their product offerings to ensure the finance proposition remains tailored to the individual manufacture – for example supporting a new product or marketing campaign.

In Ireland, BoI has to contend with dealing with two types of company – manufacturers and distributors (which import vehicles manufactured abroad to distribute in Ireland.) According to Creed, there can be a difference in dealing with the two.

A key reason for the difference is that distributors representing a brand have to make a profit because they have already bought the product from the manufacturer. In contrast, a manufacturer is selling directly into the market, meaning their objectives might be slightly different.

Additionally, manufacturers sometimes look to replicate what they are doing elsewhere in Europe, such as the UK, while distributors may lack the European contacts to emulate this.


For Thabet, there are three ways of judging success in a white-label agreement: profitability, growth and reputation. Of these, she emphasises the latter as arguably the most important.

She says: "Measuring success through numbers is the easy part; you can easily measure profit and growth in that way. However, what are more valuable are customer perception and your brand reputation.

"In terms of reputation, we conduct several customer and dealer feedback surveys where we ask our customers and dealers how well we are doing; that is the true measure
of success.

"They don’t only gauge how well you are doing, but they also offer insightful commentary.

"We learn a lot from the verbatim comments from our customers on how we can do better, and we use that feedback to drive improvements and efficiency."

For Creed, a finance provider in a white-label should judge its success in the same way a manufacturer has judged its success.
When a manufacturer has a good year, so should the finance provider; the same should be true if the manufacturer has had a bad year.

Creed adds: "Neither of us can do it on our own. Because of the huge growth in PCP in Ireland, we’re absolutely embedded together. If one of us does not do something right, we both suffer; if we work jointly, both of us win.

Different OEMs

Companies considering approaching manufacturers and distributors need to be aware that there are differences between each OEM. Not that this affects the amount of work and effort required to provide a good service.

Creed says: "It takes as much work to manage a relationship with a 2% market share as it does with someone with 10%."
When it comes to scale, however, there are differences between larger players and smaller ones.

He says: "The difference is they probably don’t have the distribution channel the big guys have.

"They will not have the dealers of scale that the big guys will have. So they probably will not have a business manager in their premises, they may not have multiple sales people. So they require more training on how to use our technology platforms and you will probably get more stuff through on your fax than on your automated system."

While there are certainly challenges in providing a successful white-label agreement, none of them have proven insurmountable in the past, and a successful partnership can be to the benefit of both manufacturer and finance provider.

One final worry might be the potential of OEMs to move into creating their own captive, after the independent finance house has spent time and resources crafting a white-label proposition.

"This is always a possibility. I think each model is unique in its own way and delivers different benefits. The decision is ultimately the OEM’s as to which route they take," Thabet concludes. <