Spread the love

Loyalty is an admirable quality, but maybe not between dealership groups and finance companies and here’s why. I have worked on both sides of the finance fence so I know what a good deal looks like, do you?

Finance companies and add-on product providers love loyalty shown to them by dealers. Especially the ones who don’t shop around for alternative suppliers. By trading on vague suggestions about the benefits of loyalty and dishing out crumbs of corporate hospitality, they keep their loyal dealers ‘out of the market’, never have to sharpen their pencil, and that means more profit for them.

A good example of this in action is a dealership group who I recently met. They have been loyally dealing with the same manufacturer finance company for many years. The commission payable on every deal is set at 5% on all balances funded. They were somewhat shocked to learn that a new dealer group that I introduced to the very same finance company was earning 18% commission on all balances funded. Given that we are talking about commissions on millions of pounds of balances funded, the first dealer’s loyalty was costing them a fortune.

Dealers also need to be mindful that with the higher balances being funded now than was the case in the past, up from an average of £8,000 to £10,400 on HP and £13,300 on PCP, the percentages that are payable to the dealer from the finance company should also have increased significantly.

Another area where dealers show loyalty to suppliers is the area of add-on products like “posh polish”. Ask yourself, are they giving you as good a deal as they should be, if you’ve been with the same people for years, how would you know? I have lately seen the same household name paint protection product being bought by some dealers for as little as £24 per kit and as much as £64 per kit by others. Similarly there are also huge variances on GAP pricing.

The key take-away from these few examples is, competition is good for all businesses and making finance firms and add-on suppliers compete for your business will result in healthier more profitable business for your dealership.

Lisa Watson who writes for Motor Trade News is a former Group Financial Services Manager for major PLC dealer groups. Before that she was Divisional Finance & Insurance Development Manager for one of the UK’s largest banks. She is based in York and runs F&I Management Services Limited. www.fandims.co.uk

Got a spare 30 seconds?

 Help us to provide you with better market insight by completing a very short survey. It is anonymous and only takes 30 seconds. You will get free access to the quarterly results.

Thinking of the switch to electric?

Need help in finding the right electric vehicle for you? Compare driving range, battery capacity, charging time, price, and features to find the perfect EV for you.