Car dealer finance penetration plummets

Point of sale industry has a “weak image”
Point of sale finance for new and used cars has slumped in the last decade, according to a report by Blackhorse Finance.
The study, undertaken by Professor Peter Cooke from the University of Buckingham, revealed dealers’ PoS finance suffered from a weak image and was considered uncompetitive.

From 1997 to 2006 it said franchised dealers’ new private car finance penetration fell from 52 per cent to 41 per cent, while used car finance penetration dropped from 53 per cent to 30 per cent.

Independent dealers’ used car finance penetration halved to 20 per cent in the period.

The used car market in the UK was about three times the size of the new car market in the 10 years surveyed with private buyers accounting for about half of total new car sales and virtually all used car sales.

New car finance ran between £5.7 and £7.1bn per annum, while used car finance fluctuated between £4.3 and £6.3bn.

The report said manufacturers’ finance houses and high street bank finance had won business from dealers by aggressively promoting their products.

“Franchised and non-franchised dealers may run the risk of losing car sales, particularly in a period of tight credit, if they do not promote PoS finance to private car buyers,” said Cooke, who added dealers should pursue finance sales even if the buyer had arranged funding before entering the showroom.

“Dealers have lost a degree of independence,” he said.
“There is a risk finance may increasingly come under the direct control of manufacturers’ finance houses with their objective of selling their own cars, and banks and building societies where the agenda is lending finance rather than tailoring a loan to satisfy a would-be car buyer’s exact requirements.”

However, the onset of the credit crunch has hit high street credit availability which some analysts have suggested could boost PoS funding.

The Finance and Leasing Association claimed in June that PoS private new car finance had grown from 47 per cent to 49 per cent year-on-year.

“It has grown in popularity as consumers are finding it more difficult to get credit elsewhere,” said Paul Harrison, FLA head of motor finance.

Insider Guide To Car Finance

Subscribe to Motor Trade Insider by Email


, ,

Comments are closed.

Powered by WordPress. Designed by WooThemes