The incoming changes to motor finance set out by the Financial Conduct Authority (FCA) represent an opportunity for used car dealers, according to Tara Williams, chief risk and compliance officer at Autoprotect Group.
“Dealers should look to the forthcoming FCA changes to motor finance as a promotional and profit opportunity and energise their used car finance approach to realise. Compliance and bottom-line improvement can go hand in hand.”
Williams sees the opportunity as threefold:
- To increase used car finance penetration which across the industry is modest
- To break negative trust perceptions that are often noted in research about dealer finance
- To leverage finance more actively as a promotional and profit opportunity
While Williams feels much of the industry has moved on from simply servicing the needs of ‘captive’ customers who need finance to buy a car, she is clear that any legacy issues about finance need to be addressed. Primarily, these include optimising finance income per transaction and a light touch on transparency.
“There is nothing wrong with finance as a profit centre, provided it is achieved whilst delivering the good customer finance outcomes sought by the regulator,” continued Williams. “We already see excellent examples of how a positive and proactive approach to used car finance can enhance the customer experience and deliver good outcomes for customer and dealer alike. Transparency can really lift the veil off negative perceptions held by some people about dealer finance.”
While the FCA Policy Statement on the final rules for motor finance include a comment about the need for ‘minor changes to some of our rules and guidance,’ Williams stressed that since the FCA also highlighted the existence of poor disclosure practices, dealers should dismiss the idea that minor changes are all that is required; not least of all because this would risk missing the used car finance openings available in promotional and profit terms, as she concludes:
“A root and branch change by many dealers when it comes to used car finance will serve them well. It will address the potential ‘pain’ of compliance failures and breaching SM&CR requirements. Equally, it will support the ‘gain’ of increased finance income achieved by increasing overall finance penetration. Just ‘tweaking’ an existing approach risks falling short on both counts.”
Williams re-joined AutoProtect Group in March this year, filling the newly created role as chief risk and compliance officer.