2:04 pm, July 15, 2016
IT’S certainly been a busy nine months or so for Richard Jones, managing director of Black Horse. And Jones, who took up his current position last July, says it has been one of the most enjoyable spells of his career, too.
Black Horse, of course, is the motor finance arm of Lloyds Banking Group, and is the UK’s leading provider of motor finance, with a range of motor loans and hire purchase products. As its MD, Jones heads up an operation that supports 5,000 motor dealers, last year alone helping more than 200,000 customers with point-of-sale motor finance for cars, bikes, caravans and motorhomes.
So what has made life so hectic since last summer? Well, for a start, Black Horse was having a very busy time of it. Jones told us: ‘Black Horse had a very strong year in 2015. We had good levels of lending growth, both within new and used finance – the new driven by our manufacturer partnerships, the biggest one being Jaguar Land Rover. Our used business grew very strongly, too.
‘We grew sales but we also grew market share. We were very pleased with the progress we made and it was quite an eventful year for the industry – I joined at an interesting time.’
Jones is, of course, referring to the advent of FCA regulation. He added: ‘I joined just as that was starting to land across the market. It was fascinating to get a sense of how the industry was adapting to that. The industry, generally speaking, has taken it very seriously and done a pretty good job of it.
‘I would say that we’re at the end of the beginning with regards to the regulation. We have a responsible regulator in the FCA. We know they are looking at a number of areas. They’re interested in remuneration across the whole consumer credit market, not just motor finance. They’re also interested in things like vulnerable customers, customers in financial difficulties and so on. The motor finance market is going to have to continue to look to improve and drive for good customer outcomes.
‘The market has done a great job to get us to where we are but I expect more change. I think we’ll have a period now where the regulator will reflect on what they have found. One of the things that any market has to drive for is consistency of outcomes.
‘At the end of a day this is a market where you’ve got thousands of trained sales staff dealing with several million customers a year. The main heavy lifting has been done now. We should expect further refinement but I think, more importantly, we should look for further refinement as a market. Almost regardless of what the regulator thinks, we should keep improving for ourselves.’
Jones makes an interesting point about the FCA’s purpose in life – the fact that it has a role to play to ensure a healthy level of competition.
He told us: ‘One area in which I’m interested, and which could develop more, is the FCA looking more closely at the relationship between manufacturers – captive finance providers – and retail dealers.
‘I sometimes see the pressure that retail dealers get put under when they’re operating in a very fine-margin market.
‘When those relationships are healthy, and they all come together to give customers good outcomes and good value, then that’s great. However, it doesn’t always work like that and the danger is that pressure gets applied – particularly where it’s an in-house captive, because the in-house captive and the manufacturer become one and the same shareholder. That causes me to raise my eyebrows.
‘Hopefully, one by-product of the consolidation we’re seeing at the moment is that dealers are able to push back. If they want to choose their finance provider, they should be free to do so. It’s important in any healthy market that you have competition in finance provision.’
The automotive world is such a fascinating one that Jones is very keen to talk about what he’s learned over the past nine months. Are there any areas of the market that have caught his eye?
‘What I’ve been impressed with in coming into the market is the professionalism of some of the used car supermarkets in particular,’ he told us. ‘I think that if you look at those over a ten-year period, they’ve gone from strength to strength as a segment. When you go and spend time with them, which I have, many of them are incredibly intelligent in how they run both their buying processes and their retailing sites. They are smartly-run operations with a real handle on the detail. They’re profitable businesses, too, making a good return but also giving great value to customers.
‘The used market in terms of overall finance levels has grown significantly in recent years.
‘PCPs are arguably at their peak in terms of penetration. If you look at PCP penetration by value, it’s well over 80 per cent now.
‘It’s difficult to see that growing any more. I think a combination of that and the fact that new car volumes are really peaking. We thought they were going to peak in 2015 and they are showing growth again in 2016.
‘We’re way above pre-crisis levels of new car sales now. I don’t think anyone can tell when we’re going to get a level of cooling down or correction but it’s got to happen at some point. We can’t just continue growing.’
If there’s one word that crops up repeatedly when it comes to modern-day automotive sales and marketing it’s ‘digital’. Richard Jones’s arrival as Black Horse MD coincided with the company announcing an investment programme of more than £10 million in its point-of-sale and dealer support technology.
He told us: ‘We’ll end up spending more than that actually. I think Black Horse has always had a reputation for driving point-of-sale technology.
‘We had E-sigs in the market before anybody else, and last year we launched Signit, giving dealers the ability to complete the whole finance agreement online.
‘That’s been rolled out now to more than 4,000 dealers. We’re also looking to invest in our front-end platforms and we’re right in the middle of that next swathe of investment, so watch this space! We’ll have some further developments that will be live before the end of this year.
‘And then we’ll be digitising more of our back-end and customer processes so that customers can inter-operate with us more on a self-serve basis. A lot of customers like to do that.
‘I think the final point of that is how we work with dealers to share data on existing customers to help dealers retain the customers that they’ve got. We want to retain customers but we only do that by helping dealers retain customers.
‘As a finance provider, we see that as a really important investment area for us. Every car retailer out there is needing to embrace digital. You see the car-buying journey digitised more and more. Customers are more likely to be in a buying mindset when they’re in a showroom these days. So it changes the nature of what the retailer is there to do because digital has done a lot of that pre-selection for them. Car finance has to move with that.’
So is the traditional plate-glass showroom on the way out? ‘It’s a hotly debated point,’ replies Jones. ‘For me, you get different types of car buyer. You get a very functional car buyer, a very emotive car buyer, and all shades in the middle. Fundamentally, a customer is buying something that’s very expensive.
‘It’s a physical asset. Therefore, having a physical connection with that purchase under a franchise or a brand that a customer places trust in, is going to remain important.
‘John Lewis, which is arguably the best digital retailer of the last 10 years, has opened a large number of stores in that time even though they have embraced digital massively. Digital, working well, complements a physical store presence. Whether you have fewer of them, I don’t know, but I don’t see a world where that physical presence disappears at all. I think customers enjoy it, they enjoy seeing the product and experiencing the product. Clicks and bricks is the successful model for the future.’
‘It’s good to play our part in the Used Car Awards’
BLACK HORSE will be the headline sponsor Car Dealer Magazine’s Used Car Awards for the fourth time this November. And Richard Jones is proud of his company’s involvement in the event.
He told us: ‘It’s great to again have the opportunity to sponsor the Used Car Awards. We know from experience that recognition from industry peers goes a long way and can be valuable to any business.
‘In recent months, we’ve won several awards from the likes of Motor Finance and Credit Today, and whilst awards themselves may not be the sole objective of our business, it’s hugely pleasing when your products, services, innovation and people are regarded as best in class.
‘So it’s good to be able to play our part in the Used Car Awards which recognise a part of the market that can often be overlooked.’
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