MOTONOVO Finance chief executive Mark Standish has branded a damning review of lending in the motor sector as a ‘catalyst for positive change’.
Earlier this month, the Financial Conduct Authority (FCA) expressed ‘serious concerns’ after finding that some dealers were overcharging customers by more than £1,000 to boost their commission.
The regulatory body said it was considering changes to the way in which commission works, which prompted Standish, pictured, to issue a statement in which he said: ‘While in the short term I recognise that the findings from the recent FCA report on motor finance will create short-term challenges, our overwhelming view is that overall, the report provides the catalyst for the retail motor sector to create positive change that will engender greater trust and sustainability in the market.
‘MotoNovo is committed to being alongside dealers at the heart of this change.’
The findings set the scene for changes in the commission model, transparency and affordability, he said, with lenders set to adopt an active role in dealers’ promotion of finance.
‘The FCA has thrown down the gauntlet to lenders and dealers to improve the customer proposition and experience. We see this as a significant opportunity to move decisively to embrace a new retailing model centred around the finance that 80 per cent of customers need and the sustainable margins that dealers require,’ added Standish.
‘While there are examples of dealers who do far better, typical finance penetration rates within the independent used car dealer segment are no more than 15 per cent. Yet the 90 per cent new car finance penetration performance points the way to what is possible.’
Standish, pictured, said he believed that as well as addressing the FCA’s key findings around commission models, disclosure of information, affordability and monitoring of intermediaries, dealers would also need to look critically at their business models.
Distribution and marketing costs would have to be optimised, margin in the metal enhanced, and the approach to finance income based around ‘a little and often’ approach that would see dealer finance become the preferred financing method for the vast majority of used car buyers.
‘It is time for an industry reboot as we work to disrupt the disruptors and competitors and work to create a new customer-centric car retailing and financing model, and the two are interwoven,’ he said.
‘In the weeks ahead, we will be consulting with dealers and sharing our thoughts on the opportunities available, and as outlined, the prize is well worth the effort!’