7:50 am, March 31, 2023
A High Court ruling that means all franchise car dealer agreements can legally be ‘ended in just a week’ is set to have huge ramifications for the European dealer network, if it is upheld, Car Dealer has been told.
Several industry leaders say they are ‘at a loss’ to understand the actions of Renault Credit International, which last year cut off Mackie Motors without explanation.
The Scottish dealer group is currently awaiting the decision of a High Court appeal after the finance house, wholly owned by Groupe Renault, effectively sank the family business overnight.
The outfit used a clause, which features in some finance agreements, to terminate the dealer group at just seven days notice.
Mackie Motors previously represented both Nissan and Renault and has argued that its relationship with the brands, as well as RCI, was an ‘umbrella agreement’ which required the finance house to act in ‘good faith’, meaning the systems could not be terminated as long as their dealer agreements were live.
Boss Kevin Mackie has previously told Car Dealer that not having access to essential systems meant it was impossible to survive.
The appeal was heard by Master of Rolls, Lord Geoffrey Vos and two other leading judges earlier this month and, while the verdict is yet to be revealed, one expert has described just how wide ranging the consequences could be.
The industry leader, who has been following the Mackie Motors case, said that RCI may have created huge future problems for dealers.
‘High street lenders may look for additional security when they realise dealers no longer have two-year rolling manufacturer agreements,’ they said.
‘If the appeal fails, manufacturers will be entitled at any time to instruct their captive finance house to action the seven day termination clause.
‘In this case, franchise dealer agreements and all other agreements in place with the dealer will become a house of cards and terminate in line with the seven day clause.’
‘It’s a bizarre situation which immediately renders a dealer in breach of its dealership agreement by being unable to operate without access to the essential integrated systems,’ the source told Car Dealer.
Kevin Mackie at a Nissan Juke launch event in 2019
The insider also says that should the court find in RCI’s favour, manufacturers’ will struggle to demand investment from their dealer networks.
They say that the lack of security that would come from no longer having the guarantee of a 24-month rolling contract could have a huge impact on the way dealers run their businesses.
They said: ‘If they no longer have the guarantee of a 24-month rolling contract, it will not be possible to make a justifiable case for investment to many of the current dealer standards.
‘As the industry looks to move to the proposed agency models there appears to be many unanswered questions relating to RCI’s actions and how it could affect dealers and their franchises in the future.
‘It will also be interesting to see how the FCA respond if customers lodge complaints against captive finance providers regarding treating customers fairly within their guidelines.
‘If for no reason their already approved vehicle finance is cancelled prior to delivery of their new vehicle and they then discover that they can no longer access the manufacturers exclusive deposit contributions previously approved via the captive finance providers.’
