A study of point-of-sale motor finance has found that it is at a
“crossroads”, and the long-term future of the industry hangs in the
balance.
Penetration of PoS finance for new cars sold by franchised
dealers has fallen from 52 per cent in 1997 to 40 per cent in 2007,
while franchised dealers’ penetration rates for used car finance
tumbled from 51 per cent to 36 per cent over the same period.
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“Independent used car dealers have seen their finance deals go
down from 38 per cent of used car sales to just 18 per cent during
the same period,” it found.
And while the average value of a finance advance has risen by 30
per cent in the same period, the number of advances has fallen by a
similar proportion.
Competition from direct lenders, PoS finance’s bad reputation
among consumers, and a lack of understanding of the benefits of PoS
finance were cited as major reasons behind the decline in the
forthcoming report, carried out by Professor Peter Cooke on behalf
of Black Horse Motor Finance.
But the picture is not entirely bleak, Black Horse said: “There
is still a huge profit potential out there.” Under a quarter of
dealers offer finance to 50 per cent or more of their customers,
meaning huge numbers of prospects are not even asked about finance
at the PoS.
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By GlobalDataDealers using PoS finance from an independent funder may even
have an advantage over manufacturers’ finance houses or high street
banks, Black Horse claimed: “After all, a dealer’s salesperson
comes face to face with the would-be car buyer providing a first
class opportunity to discuss the prospect of finance while the
adrenalin is still flowing.”
Cooke said: “Dealers need to recognise the changing trends in
their vehicle and finance markets, and respond to those changes by
adopting a credible finance strategy for the future; if not, they
may be compromising their own competitiveness in the
marketplace.”
Motor Finance Issue: 45 – July 08
Published for the web: July 3 08 18:0
Last Updated: July 7 08 12:57
