Having the right stock funding plan can make all the difference to a dealership, says Sean Kemple.
IT’S an easy scenario to picture. Your dealership is doing well but you have dreams of expanding.
Maybe moving to larger premises, stocking more vehicles, stocking a different type of vehicle, or perhaps by making improvements to your current forecourt.
The world of finance makes everything much more accessible – not just for customers buying their next car but also for dealers.
Traditionally, dealers have favoured self-funding, using their own money for stock, or by borrowing from family members or investors.
Then there are those who opt for bank loans or use their overdraft facility. However, there is an attractive alternative in stock funding plans from a finance partner, which are a great way for dealers to improve and develop their business.
There is an old saying that dealers can and should bear in mind when purchasing stock: ‘If it appreciates, buy it; if it depreciates, finance it’. We all know that stock is generally depreciating on a monthly, weekly and even daily basis.
For that reason, finance can provide real benefits to a dealer’s bottom line.
By using stocking plans from a finance partner, dealers can ensure that their forecourts are fully stocked at all times.
It allows them to keep track of stock easily within a single facility. However, this kind of funding doesn’t just have to be used to pay for new stock, it can also help dealers pay for forecourt improvements – such as additional servicing and valeting bays for example.
And dealers don’t just have to use this funding to buy cars at auction houses – it can also be used to help purchase vehicles from private sellers and elsewhere, which means there are more ways of buying the best stock for your business.
At Close Brothers Motor Finance, we offer three types of stock funding plans to dealers, depending on their needs.
The first option is what’s known as an APAK facility, which is a loan secured against funded vehicle stock. The loan can fund up to 80 per cent of the invoice value of the car, and it’s an easy way for dealers to monitor closely what they’re buying as well as the costs involved, with a fully controlled online system.
The next option is a stocking loan, which is often an unsecured loan. This allows dealers to expand where they buy their cars from – such as part-exchanges from other garages, or from private sellers. It’s a more flexible way of stocking a forecourt over a longer period of time, and with less admin involved.
The final funding option is a business development loan, which is interest-free for 12 months. This is the most flexible kind of funding and can be used to invest in the business, upgrade offices or make further changes to a forecourt.
One dealer that has benefited from stock funding plans is Ashford-based Key Auto Trade, which has been able to buy more expensive stock and appeal to more customers.
Khaled Zureiqi, the owner of the Kent-based dealer, said: ‘Working with Close Brothers has helped us to increase our sales through finance by a third, but further funding meant we could buy more stock, with this type of finance allowing us to explore different aspects of the market, which we wouldn’t otherwise have been able to afford. It’s the best system I’ve used so far!’
Funded dealer partners of Close Brothers Motor Finance also receive regular performance-driven insight from their dedicated account manager to help boost sales and profits by turning over more vehicles more regularly.
In a tough used car market, it’s more important than ever for dealers to ensure that they free up their own capital to help develop and expand their businesses.
Meeting specific business objectives, tailored to each dealership, is a key part of what stock funding plans help to achieve.
So, what next? If this is something that sounds right up your street, there are a number of ‘next steps’ you and your business can take.
The easiest one is to explore our website – closemotorfinance.co.uk/dealer – which also talks you through the different ways to apply for funding. If you prefer a face-to-face conversation, you’re in the right place as well.
As one of the largest automotive finance providers in the UK, we have 115 account managers working across the UK who have regular conversations with dealers of all shapes and sizes about what stock funding plans might work for them.
But don’t worry if you’re already using another funding partner – we work with a number of dealerships that have multiple dealer finance facilities, as the most important part is making sure that dealers have access to the right capital to help improve, develop and strengthen your business.
• If you currently use your own capital to fund stock, consider where else in your business you could invest this.
• Think about where you buy your stock from currently and if you want to explore other avenues to purchase further vehicles – eg, private sellers.
• If you haven’t already done so, work up a list of business objectives for the coming years and look at where finance can help meet these goals.
• Traditional routes of bank loans and overdrafts can’t offer the support of dedicated dealer funding solutions.
Sean Kemple is director of sales at Close Brothers Motor Finance, one of the UK’s leading providers of motor finance. The company works with over 8,000 dealers and provides finance for new and used cars, LCVs, motorcycles, caravans and motorhomes. Go to closemotorfinance.co.uk to find out more.