Maintaining the traditionally strong finance and insurance (F&I) revenue stream inside dealerships is much more vital in an economic climate where consumers are cautious, lead times for brand spanking new cars are longer, and manufacturers are evolving their distribution models, despite May’s latest automobile registrations being up 16.7% (SMMT).
For James Tew, CEO of finance platform provider iVendi, the reply lies in technology, especially with stricter Financial Conduct Authority (FCA) Consumer Duty regulations coming into play at the top of July. The corporate has been working closely with UK lenders to include as much information as possible into its platform.
Tew says: “Every dealer has a couple of lender and each lender has a couple of product and all this needs explaining to the buyer.
“We’re baking all this into our solutions to make it easier for the dealer which, in turn, makes it easier for the buyer. We’re the conduit between the lender and the dealer and we ensure that products are presented accurately, fairly and with absolute transparency and that the buyer can understand what has been presented.”
By aggregating offers in a consistent and compliant way from a multiple lender panel makes it more straightforward for the buyer to match and select whether or not they are online or within the showroom, in turn delivering high levels of transparency and ultimately, trust, which is important for ongoing success, based on Tew.
He adds: “We already see a greater conversion rate online when there may be a wider alternative of finance products.” Consumers are increasingly using eligibility-checking tools, which, says Tew, helps dealers, since, depending on the outcomes, they could turn into hot leads. Plus, consumers are significantly better placed to confidently transact and lenders can provide them with probably the most suitable products.
Tew says: “The FCA endorses the usage of these tools as they don’t impair a consumer’s credit rating. If lenders share their information on risk appetite, then we will present rates and products accordingly.”
When iVendi published its latest white paper providing guidance on the Consumer Duty, it resulted in probably the most downloads within the shortest space of time. Tew adds: “Lenders recognise that if dealers don’t become familiar with the regulation, they’ll struggle to have a relationship with them going forward.”
Likewise, finance provider MotoNovo Finance has been updating its technology and processes to make sure dealer partners are best placed to comply with the Consumer Duty and thereby enable dealers to proceed succeeding in F&I. The lender has helped greater than 2,000 dealers and brokers across the UK to organize by completing Distributor Readiness Assessments (DRAs) as a part of its broader Distributor Support Programme.
Designed to assist dealers and brokers understand and embed the substantive requirements of the duty as guided by the FCA, MotoNovo’s DRAs have been delivered by its field team. All have accomplished extensive training including from specialist motor, asset finance and leasing law firm Auxillias and a programme that sees all team members accredited as each got SAF (Specialist Automotive Finance) – the dedicated automotive finance skilled qualification operated by the Finance & Leasing Association – and authorized by the London Institute of Banking & Finance.
Business director Debbie McKay says: “Principally, it’s about benchmarking their (dealers/brokers) current readiness and signposting tools and resources to assist them make the numerous shifts the regulator expects, where needed.
“The main focus of the DRA is on helping dealers/brokers understand the Consumer Duty expectations and their current state of While watched by the FCA, F&I still delivers welcome profit. Debbie Kirlew reports M readiness, difficult them to deal with questions posed by the regulator.”
Dealers and brokers should consider the duty’s impact on their strategy and approach to remuneration, risk and incentive structures to make sure they drive good customer outcomes, based on McKay.
VALUE-ADDED PRODUCTS
With a big disparity between the sales volumes of value-added products (VAPs) between dealers, based on iVendi’s data, F&I profits may be further fuelled with the correct focus. Dealers with finance penetration could improve revenue by selling more non-insured VAPs comparable to paint protection and insured VAPs comparable to GAP (Guaranteed Asset Protection), says Tew.
He adds: “There is a large disparity between the common dealer’s sales of VAP and the highest end performers. We’re taking a look at our data to find out what the common looks like compared with dealers reaching significantly higher levels of VAP sales to benchmark them for dealers.”
With exact figures yet to be crunched, iVendi estimates the common deal would have £400-£500 of VAPs incorporated. However the top dealers may be as high as £1,100- £1,200 per transaction, highlighting a big opportunity to extend revenue streams. Dealers could also consider broadening their VAP offering as EV ownership increases and the used EV market develops. An obvious area is the sale and installation of home chargers for the reason that retailer is within the prime position to act as soon as an order is placed or a used EV purchased, Tew advises.
Not all F&I products are equal, AutoProtect warns, and dealers must make themselves aware of the differences in the event that they are to proceed successfully selling the very best products to consumers. These differences should now be evident from the product reviews that suppliers had to supply to their dealers and brokers by April 30 to comply with the Consumer Duty.
These had to incorporate: details of the product and its rules; key features of the product; goal market of the product; end-to-end fair value assessment, including any commissions; and the way the lender or insurance provider expects to work with their dealers and brokers. In turn, dealers and brokers had to evaluate whether their distribution arrangements (including any remuneration received or paid, and the distribution of some other product, for instance, insurance – alongside finance products) offered fair value to the shopper to comply with the Consumer Duty by its July 31 launch date.
This text was first published in AM’s
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In keeping with YouGov research published last yr, one-in-10 UK drivers had experienced their automobile being written off or stolen within the previous five years, but only 17% could replace their automobile on a like-for-like basis using their comprehensive insurance pay-out alone. Mike Edwards, AutoProtect Group chief sales and marketing officer, says: “Relating to GAP and other insurance products, assuming all of them provide the identical cover is to be avoided; they seldom do. Knowing the detail is critical for dealers and brokers to fulfill customer needs.
“Now’s the time for dealers to reassess their insurance product line-up since the regulator has explicitly noted that the motor finance sector is firmly on its radar, based on letters sent to lenders and brokers, including dealers, in early March.”
Edwards also highlights Personal Leasing as an ideal example of when the correct GAP product is crucial. Personal Leasing/PCH is constant to realize traction especially as monthly payments may be lower than for a comparable PCP agreement. Nonetheless, unlike PCP or HP, leasing products have a built-in end date that may be expensive to finish early.
Any early termination typically means paying up all or many of the outstanding monthly payments which implies a vehicle write-off risks leaving customers exposed and the suppliers prone to losing that customer.
He adds: “Dedicated lease GAP products, comparable to that developed by AutoProtect Group, with its unique features, are usually not universally available, but it surely is one that every one businesses providing personal leasing/ PCH must have exposed to the shopper.”
As dealers review their GAP product line-up, having the unsuitable product is a risk, based on Edwards, yet having the correct tool for the job is definitely arranged. 
This Article First Appeared At www.am-online.com
