Mark Standish,chief executive of MotoNovo Finance has called for a reinvention of the motor finance market.
In response to the Financial Conduct Authority (FCA)’s consultation on motor finance discretionary commission models, Standish said the regulator’s recommendations point to fundamental changes in the commission model, with a dealer’s capacity to set customer interest rates due to be banned.
“It’s exactly what we predicted back in March,” said Standish. “Where we thought that significant change was likely and now see this as a unique opportunity for the dealer sales and financing model to reinvent itself, making it both trusted by, and relevant to, today’s highly informed and protected car buyer. Rather than achieving used car finance penetration of as low as 20%, let’s use the opportunity to aim higher and ensure the dealer, both physically and digitally, is vital to the used car buying and financing journey.”
Removing the discretionary commissions marks a significant step from a long-established model, MotoNovo noted. Moving forward, the industry will need to re-examine pricing strategies to ensure good practices remain central to the dealer’s cultural model.
Since the FCA released its Motor Finance review in March, MotoNovo has made substantial investment in new financing models, technologies and dealer support, in anticipation of significant regulatory change.
The firm has embraced risk-based pricing, increasing its pilot of the new model across dealerships in Q4. In addition, there has been development in the company’s self-serve finance access – designed to assist dealers in developing an omnichannel car finance offering.
Standish concluded: “Used vehicle dealer finance can become far more important for dealers. To realise this ambition, the industry must re-boot. At the heart of our approach to support dealers in doing the right thing, we are already rolling out our Triple Win approach. This champions a financing philosophy that works for car buyers, dealers and ourselves. It is designed to drive used car finance up and place used car financing and sales together.