Retailer’s steady focus on F&I helps performance
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Retail group Vertu Motors appears to be weathering the current
difficult environment for car sales somewhat better than certain of
its rivals. Its half-year results show it managed a profit before
tax of £1.9m on turnover of £423.5m, with strong growth in
like-for-like sales of new and used cars, during a period which saw
many dealerships close their doors, hit by falling sales and a lack
of consumer confidence.
Chief executive Robert Forrester says that Vertu’s finance and
insurance (F&I) strategy is “fundamental” to the group’s
success, although he observes that falling acceptance rates are a
problem at the moment. “We are seeing acceptance levels fall as
lenders adjust their scorecards, and it is definitely having an
adverse effect on volumes,” Forrester says. Motor finance lenders’
increasing risk aversion, especially at the sub-prime end of the
spectrum, has been felt particularly acutely in the group’s Motor
Nation car supermarket sites, Forrester reports, although no outlet
is immune from the squeeze.
On the plus side, Forrester says, Vertu “has secured or is in
the process of securing” renewed agreements with all its finance
partners for next year, and the declining competition from other
finance sources – direct lenders or equity release schemes, for
example – is boosting penetration rates. “There’s still a lot more
potential in F&I for us to benefit from,” he believes. “It’s a
difficult time for everybody, but we have to work in partnership
with finance companies.”
Consequently, there is a strong focus on training and workshops
for business managers, with business development director Peter
Stewart heading up group F&I strategy as part of his role.
“F&I is woven into everything we do – it’s integral,” Forrester
adds.
Insurance policy
Used car finance is performing well, with a volume of £90m in
the past year and penetration rates “well above” the industry
average. On the “I” side of the F&I equation, meanwhile, staff
are encouraged to sell GAP insurance – but payment protection
insurance (PPI) is not sold directly by Vertu’s dealers at the
point of sale (PoS), despite their FSA-regulated status.
“We took the decision about 18 months ago to move away from
selling PPI at the PoS,” Forrester explains. “We saw the way the
market was shifting, with personal injury lawyers increasingly
looking to take action on behalf of aggrieved customers of
supposedly ‘mis-sold’ PPI policies, and decided to move away from
selling PPI at the PoS to a system whereby our finance partners
contact customers separately to ask if they are interested in
taking out a policy.”
Vertu customers buy more policies this way, he says, with finance
partners selling monthly payment policies only, rather than
single-premium plans, “in line with FSA recommendations on Treating
Customers Fairly”.
Back to basics
“F&I policy at Vertu isn’t about initiatives,” Forrester
says, “it’s about getting the basics right – measuring performance,
providing training, and making sure that customers know what is
available.” Despite this, the marketing presence of F&I
material in dealerships is “fairly muted” as Vertu’s main raison
d’être is, after all, to sell cars, he emphasises.
Interestingly, he is of the opinion that F&I training
resources are better directed at individual dealerships which
already perform well in this area, rather than poorly-performing
outlets. “Helping dealers go ‘from good to great’ adds more value
to our bottom line,” he reports.
Forrester, in common with many other motor retail bosses, is a
fan of the Finance & Leasing Association’s Specialist
Automotive Finance (SAF) campaign, which aims to raise professional
standards when selling F&I through the SAF Competence Test,
taken by dealership staff who can then display a certificate, which
it is hoped will raise customer confidence.
Fleet sales
Although Vertu has no current plans to set up a fleet leasing
arm, unlike several of its rivals which offer fleet management and
funding to corporate customers, it has two large fleet specialist
centres, in Newcastle and Birmingham, and two smaller ones in
Gloucester and Stoke, which deal with major corporate clients –
“with considerable success”, Forrester says. Over 17,000 units were
sold through these centres over the past year, and Vertu has
recruited a number of experienced staff to help grow this side of
the business further. “There’s definitely an opportunity in
corporate sales, although we are a retailer rather than a leasing
company and want to stick with our core business of selling cars,”
he states.
Car retailers could be forgiven for feeling despondent at
present, but Forrester is relatively upbeat. “It’s all about coming
into work every day determined to make a difference. We have to do
better than everyone else,” he says.
