2019 in review with Karl Werner
2019 has been an increasingly challenging year for many in motor retailing. The trend of a fall in new and then used car sales seen in 2018 has continued. From a finance perspective, new car consumer finance has held up very well with in excess of 90% of consumers opting for dealer finance. The used car finance market saw new business increase 6% by value and 5% by volume in Q3 year-on-year, but it continues to lag behind new car penetration levels with performances broadly in the 20-40% range.
The most significant news for motor finance has primarily come from regulatory developments. From December 9th, all dealers/brokers/lenders must comply with the Senior Manager & Certification Regime (SM&CR). The new level of personal accountability this brings will inevitably underpin a broader change in the industry, improving the overall customer journey within dealer finance.
In March, the FCA published their Final Findings report on motor finance and in October they published a Consultation Paper identifying their proposal to ban discretionary commission structures and to increase the level of transparency surrounding commission and fees. This promises major positive change in the months ahead for the industry.
It is essential that the market does not see regulatory changes in isolation; there are other factors in play that are placing pressure on the traditional car retailing model. Developing the role of motor finance, especially in the used space can be the catalyst for positive change to start addressing the broader market dynamics.
Into 2020, dealers will need to be leaner and more digitally engaged. In used car retailing their ‘crown jewels’ will be stock. Managing and deciding how and who they collaborate with to market this stock will be critical and affordable finance can play a crucial role in what will surely be an increasing move to online.
Any number of online channels may want to leverage dealers used car stock to their advantage, taking a share or all of the income potential from chassis and/or finance income. However, without access to that stock, unless they buy used vehicles themselves with the ensuing risks inherent in a depreciating asset, then such disrupters may struggle.
2020 can be the year that dealers recognise that used car stock is their area of competitive advantage, that finance is their perfect route to impress car buyers and that with whom they choose to collaborate will be increasingly vital to their future."
By Karl Werner
Deputy CEO of MotoNovo Finance
