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Embracing FCA regulation to ensure the fair treatment of customers consistently can create a good customer outcome and a good dealer outcome at the same time. MotoNovo views the proposed regulatory changes to motor finance as a catalyst for positive change.

To ensure dealers create the fair outcomes sought by the FCA, it will be essential that dealers consider how best to meet customers’ needs throughout their car financing journey. Customer success must be at the heart of a dealer’s approach. In developing a customer-led ethos all areas of financing need to be considered from a customer perspective, generically and at an individual level including in the design of financial promotions, in sales interactions and ongoing service. To ensure this approach is being delivered consistently it will be essential for dealers to maintain  appropriate systems and controls to monitor whether the strategy is successful and whether customers’ needs are being met.

Compliance with these standards may mean change, but get this right and a customer win can mean a dealer win as well and in a challenging market, this could be crucial.

The prize for dealers from embracing positive change in their approach to used car finance is threefold; compliance with Financial Conduct Authority (FCA) requirements, reputational enhancement, and financial. With new car finance data indicating a finance penetration of 91.2%, while used car penetration often lingers at under 20% and at best circa 40%, there is a huge opportunity for dealers; one that can be realised by delivering good customer outcomes consistently.

While much industry focus has concentrated on the £165 million annual credit saving to customers that the FCA identified in its October 15th Consultation Paper, MotoNovo is clear that dealers need to look to the positive opportunities the paper presents; they also need to recognise the threat of not changing.

The vast majority of people buying a car need finance as the current new car finance penetration evidences. If dealers fail to fulfil this customer need in a compelling, timely and compliant fashion, then in today’s increasingly digital car retailing environment, they risk losing not just a finance opportunity, but the car sale as well. However, get the customer finance experience right and car buyer and dealer can benefit.

MotoNovo’s analysts have been able to establish from the FCA’s data used in their recent Consultation paper that modest improvements in used car finance penetration could offset the annual customer interest savings sought by the regulator.  It also indicates the potential to make incremental improvements, the potential opportunity is entirely reliant upon embracing the six good outcome principles.

Dealers currently achieving a used car finance penetration of 20% will need only a modest improvement to 26% to offset any fall in income that might follow from lower interest rates/commission; anything beyond this is an incremental gain.

For a dealer achieving a 40% penetration, a move to 51% creates the threshold for growth.

Success all stems from delighting more customers; however, we are not alone in working to engage used car buyers’ need for finance. Traditional personal loan providers and emerging broker and fintech channels are all seeking to gain customer approval. It is an increasingly competitive market and for many consumers, that journey starts online, where used car finance from dealers is too often under-represented.

We need to take dealer finance online with the type of Self-Serve capability that customers want and which we offer dealers, or risk losing the opportunity. With tools such as findandfundmycar.com and new pricing mechanics, we can transform used car finance to benefit car buyers and dealers. Changing to embrace new ways of promoting and delivering used car finance to sell cars is critical. Rather than wait, dealers can make these positive changes today and we can help them to achieve them.

By Mark Standish, CEO of MotoNovo Finance

Following the latest from the FCA, Mark Standish gives his view on how regulatory changes to motor finance can be seen as a catalyst for positive change to "create a good customer outcome and a good dealer outcome at the same time"...


Delivering the FCA's six customer outcomes can create a good dealer outcome

Marketing may have changed over the past decade, but its objective remains the same: getting the biggest bang for your buck. However, an increasingly multi-layered approach has added levels of complexity. Essentially, a dealer’s marketing spend could easily be bottomless with so many channels to choose from, but you need to make sure spend is converting into enquiries and sales so that you’re getting a good ROI.


In today’s multi-channel world, knowing you spend ‘x’ on marketing to gain ‘y’ enquiries just isn’t enough. You need to know the nitty gritty, not even which channel is delivering effective ROI, but which campaign produces the best results whilst providing the highest levels of personalisation demanded by today’s consumer. Savvy marketers continually tweak campaign messages whilst it’s live to ensure the best outcomes are achieved.

The key question is not ‘are you spending too much on your marketing?’, but ‘what ROI is your individual marketing initiatives delivering?’.

Dealers do need to ensure their marketing budget is realistic and reflective of the business. According to CDK Global research undertaken last year (2018) dealers spend between 0.2% and 1.3% of their turnover on digital marketing. Almost two-thirds (64%) of the total marketing budget is spent on digital tools compared to three years ago when this figure was 45%, whilst some dealers spend 85% of their budget in this area.

Earlier this year Marketing Week reported that the UK is now the largest online advertising market in Europe and the third largest worldwide. An almighty £1.34 bn was invested in online marketing in 2018 and by 2020 almost two-thirds (62%) of the UK’s advertising budgets will be spent online.

The digital marketing arsenal is extensive including the likes of live chat, consumer reviews and video marketing as well as website and social media demanding a clear campaign by campaign objective.

Track your activities – make sure you’re tracking every penny that you spend and analysing the campaigns you’re doing. Otherwise, you won’t be able to tell the effectiveness of your marketing activities or know what to continue or drop.

Spend carefully – remember, you don’t have to spend a lot to get a lot. In this digital age, you can utilise platforms like social media and email marketing to attract customers without having to spend big bucks on newspaper listings or billboards.

Consult an expert – if you’re not sure how to get the best ROI, you could ask a marketing consultant to do an audit of your marketing activities and make recommendations. Alternatively you could enlist an agency to help you with your long-term marketing efforts.

Do some research – it doesn’t hurt to see what other dealerships are doing with their marketing. Don’t copy them outright, but you can learn a lot from a successful neighbour.

Dealers also need to develop complimentary pay per click (PPC) and search engine optimisation (SEO) strategies ensuring they don’t overlap or conflict. By working in tandem, PPC and SEO work together to deliver the right message to car buyers and entice them to the dealer’s website and make an enquiry. Basic mistakes include location strategies when a dealer could well be performing for this organically or bidding on keywords when different ones could well be more effective in generating leads rather than just appearing in a search.

For smaller dealers and independents, there’s no doubt digital marketing allows businesses to punch above their weight, but effective targeting and relevant messaging alongside accurate and real-time measurement are vital if ROI is to reach its optimum.

Marketing may have changed over the past decade, but its objective remains the same: getting the biggest bang for your buck. However, an increasingly multi-layered approach has added levels of complexity. Debbie Kirlew explains...

Are you making the most of your marketing spend?

Considering the headwinds blown by political, economic and consumer uncertainty, the new and used car markets were tossed around in 2019, but remained remarkably resilient.

Cox Automotive forecasts 2019 will have ended on or around 2.29 million new car registrations, 7.79 million used car sales and over 10 million transactions. Both figures represent year-on-year declines – 2.9% and 1.6% respectively – but when you factor in the collapse of the new diesel market, supply issues around September’s introduction of the Real Driving Emissions standards, demand for electric vehicles outstripping supply and the impact of Brexit, it could have been much worse.

Against this backdrop dealer profitability for the year has been under intense pressure, but what’s new about that?

BDO’s annual Motor 150 Report, which aggregates the performance of the UK’s largest 150 groups by turnover, shows return on sales of just 0.82%, almost half of what it had been as recently as 2016, and the first time the figure had dipped below 1% since the dark days of 2008.

With new and used sales down for the year, aftersales held up with a gross profit margin of 10.9% in line with last year, but costs increased with an 8% rise in operating expenses.

“Despite the challenging times there is still profit to be made and it is those groups who have the best controls and processes and who constantly deliver a first class experience to their customers that are achieving the highest level of profitability,” said Steve Le Bas, BDO’s head of Motor Retail.

The latest data from ASE, the dealer profitability specialist, supports this picture with average return on sales for franchised dealers in the rolling year to October tracking at 0.84%, down from 0.94% in the same period last year.

The analysis showed how used car stock remained at historically high levels during October, with days in stock rising from 57 to 59.5 days, although dealers achieved a slight improvement in the all-important used-to-new ratio selling 1.49 used cars for every new car sold, closing in on ASE’s 1.5% benchmark for the sector.

The recurring challenge for many dealers is keeping a lid on costs; easier said than done in this environment, but not impossible.

Mike Jones, chairman of ASE, is under no illusion that focusing on overheads is vital to improving profitability.

“Over the past year we have seen an increase in general overheads of 3%. As we move into 2020 I expect to see a real war on costs taking place. The new car market is not forecast to improve; therefore retailers will need to manage cost increases to compensate, whilst continuing the focus on used cars and aftersales,” he said.

This is where incremental improvements start to pay-off.

I was recently talking to a dealership owner who discovered his business was still paying a subscription for a group-wide telephony service which had been replaced two years previously. No-one had thought to cancel the monthly subscription resulting in thousands of pounds coming off the bottom line.

Good housekeeping, including regular reviews of processes, controls and supplier contracts, can pay dividends and help address the cost inflation which will remain an issue in what is certain to be an equally challenging 2020.

Improving ROI on marketing spend can also improve overall business performance and profitability. The idea is that you can drive customer acquisition and retention with low cost, but highly effective marketing. Having a good digital customer journey and effective social media is essential to this – have you read the article in Drive magazine on making CRM work for you?

Considering the headwinds blown by political, economic and consumer uncertainty, the new and used car markets were tossed around in 2019, but remained remarkably resilient. Curtis Hutchinson explores 2019 and ways to improve for 2020...

News - January 2020

Delivering the FCA's six customer outcomes can create a good dealer outcome

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