VEHICLE FINANCE AND INSURANCE SALES: A MAJOR PROFIT OPPORTUNITY FOR DEALERS
15 April 2006 - alchemy performance development ltd

APD says dealers can increase their profitability by embracing finance and insurance sales on new and used vehicles instead of allowing high street lenders, internet-based companies and supermarkets to capitalise on the business opportunities.

New and used vehicle customers are a captive market for franchised and independent dealers, according to Paul Turner, managing director of specialist automotive research and development consultancy, apd, and retailers must go on the offensive to secure finance and insurance sales.

New rules were introduced in January 2005 governing the sale of finance and insurance products. Consequently, under the regulations, all motor retailers selling finance and insurance products must be authorised by the Financial Services Authority.

Speaking at this week’s Motor Finance Europe Conference, Mr Turner said: “We believe the new rules can improve the revenue stream for dealerships and, therefore, provide an opportunity to expand the business and increase customer retention.”

Under the rules, a dealership must employ a qualified business manager to sell finance and insurance products to customers.

Mr Turner: “This should enable more customers to be met and therefore more business achieved. However, too many dealers only see employing a business manager as an expense and therefore lose out on numerous business opportunities.”

Despite 26% being the net profit in an average dealership from the average cost of selling a vehicle with finance, Mr Turner says: “Finance and insurance is a dying profit stream for many dealers, but it needn’t be.

“Finance and Leasing Association figures show that the number of new cars sold on finance by franchise dealers since 1997 has dipped from around 50% to 40% and used cars sold on finance from 40% to 20% over the same period.

“Instead of ignoring the sales potential, dealers should, if they don’t want to employ a business manager, outsource finance and insurance sales to an external provider, whether that be a broker or a lender prepared to set up a network of fully trained individuals under their control.

“Recent research conducted shows that customers are conditioned to borrowing money more than ever before and vehicle insurance is a legal requirement; therefore there is the potential to increase business with every sale.”

With profits on new and used car sales being squeezed tighter than ever before, apd says it is vital that dealers market other services and compete with money lenders and insurers, or else the number of motor retailers who failed last year - 260 - will rise even higher in 2006.

Mr Turner said: “Dealers have two choices. They can either retain, or recruit a finance and insurance manager and handle the business opportunities presented by the new finance and insurance regulations themselves. Alternatively, they can outsource finance and insurance sales to a specialist - fully trained, self-motivated and qualified.

“Pursuing the latter strategy puts dealers in a win-win situation. They will sell more cars and finance through a highly motivated and trained specialist; they will save money by reducing headcount; manufacturers will see more of their vehicles being sold; and lenders will see increased penetration of their products.”

www.alchemy-pd.com

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