Wednesday 16th Mar 2016
A study by Hitachi Capital Motor Finance claims dealers could miss out on £246m a year in finance revenue on used vehicles. The claim comes as dealers are increasingly facing a squeeze on profit margins.
The industry has faced a flurry of recent surveys that highlight the pressures dealers face with increased costs from FCA regulations and the rise in pre-registered volumes.
Hitachi’s analysis looked at the finance revenue missed by using DIC commission structures rather than APR based models on used vehicles.
An average dealer is missing out on additional revenue of £26,031 a year per site in APR based commission alone. An APR model helps customers and dealers by removing fees and putting additional profit into the amount to be financed by the lender*.
Hitachi also argues that APR based models are simpler to administer as they ensure customers are fully aware of the costs of the loan including the monthly payment, any interest charged and the APR.
Commenting on the findings Lisa Harrison, Head of Business Development for Hitachi Capital Motor Finance said: “Despite the strong performance of new car sales, dealers are continuing to face pressure on profit margins. This study underlines the need to approach used sales revenue in a structured way.
“We know that right finance product on used vehicles can help close the sale and build customer loyalty. Hitachi knows that by building our lending criteria around the individual rather than the vehicle, we have more flexibility to do the deal and it supports the ‘treating customers fairly’ criteria, by building in affordability.”
Hitachi Capital Motor Finance is rolling out a new range of finance products to dealers following a successful trial that has seen retailers boost sales by 10 per cent.
Hitachi has worked with dealers to deliver promotional finance offers around three main products; interest free, interest bearing credit and countdown interest free credit, commonly known as ‘buy now pay later’. The products are available on purchases priced between £2,000 and £25,000. They offer a range of flexible benefits to the consumer, and award winning service from UK call centres.