Transparency surrounding commission earnings amongst dealers is crucial to British consumers, research from Close Brothers Motor Finance has found.

According to the data, 34% of consumers expect car dealers to earn commission on vehicles bought on finance, whilst 28% don’t mind so long as they are informed.

Half of all consumers believe this responsibility to inform lies with the dealer. Conversely, 18% believe it is the finance provider’s responsibility whilst 8% believe it is the media’s responsibility.

The research precedes the introduction of new FCA regulation to the motor finance on the 28 January 2021. The regulatory changes include the banning of pricing models which link dealer commission to an interest rate and clarifying commission disclosure rules.

Seán Kemple, managing director of Close Brothers MF believes commission is a positive tool within the industry: “It works well across a variety of industries which involve products being sold via intermediaries, including mortgages, pensions, and insurance.”

Whilst only 10% of consumers are uncomfortable with the concept of discussing commission with their dealer, such changes are expected to ensure more consistent outcomes whilst boosting transparency.

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However, Kemple reinforced the importance of supporting consumers: “The new changes to motor finance will ensure that the interest rate people pay on their finance agreement is based on their own individual circumstances, and that there is complete transparency around the commission a dealer is earning.

“This means customers can be confident in their judgement of the impartiality of a dealer before they make a decision about how to fund their vehicle purchase.”

Data from the Close Brothers revealed that only 13% of consumers don’t think dealers should earn commission when vehicles are purchased on finance, although this rises to 18% amongst millennials.

A pivot to private ownership

The pandemic has driven a major shift in transport behaviours, with a growing reticence around public transport driving an increase in private car ownership. Subsequently, the number of cars bought on finance has risen significantly.

However, consumers are divided in their understanding of what influences the cost of finance. Some 35% believe their credit score is the deciding factors, 21% think it is the motor finance providers, 20% the dealership and 17% the bank provider.

Despite the FCA changes representing a positive outcome for consumers, dealers have expressed concerns. Kemple explained: “They’re unsure about what the impact will be on their businesses and their customers, and one in ten are unlikely to meet the FCA deadline.

“Transparency and consistency have always been a priority for us as a responsible lender, and we’re working closely with our dealer partners to help them become confident in what the changes mean, while minimising disruption to the business or sales figures.”