There are several advantages to offering finance packages at your dealership, and the only way to learn whether you have anything to gain from incorporating such policies or not is to properly understand the benefits. However, before we get into the details of finance packages, let us take a brief look at what the concept behind dealer financing is exactly, and how it works in the UK.
What is a Car Dealer’s Finance Package?
A dealer’s finance package is an indirect, third-party loan for customers, which is offered at the time of a car purchase/lease. The dealer will sell the loan to a registered UK bank, or some other FCA-approved third-party lender. Third-party banks/lenders buy these loans because dealers offer a discount on them and they earn in interest from each payment made by the customers.
Do Dealers Need Motor Trade Consumer Credit Authorisation from the FCA?
Yes, just like a third-party bank or any other credit organisation must be FCA-approved to sell a car loan, the dealer must also have the necessary Motor Trade Consumer Credit Authorisation from the Financial Conduct Authority (FCA) to sell them. Getting the necessary approval to act as a credit broker at your own dealership can be quite tricky though.
The compliance requisites are strict, but Scott Robert can help expedite the whole process by guiding dealers through every step. It starts with an assessment, even before you apply for the Motor Trade Consumer Credit Authorisation licence online, but they will not leave your side until the dealership has been authorised by the FCA to offer car dealer finance packages to customers directly.
What Do Dealers Have to Gain by Offering Finance Packages?
There are major benefits to be enjoyed by getting that Motor Trade Consumer Credit Authorisation. We have highlighted a few that should get the point across.
- After you get authorised to offer loans directly to customers, it will immediately improve the dealership’s sales figures.
- Most purchase decisions are made in the moment, so the speed of conversion improves automatically when a dealership can capitalise on the moment with a quick loan approval.
- The security of not having to pay large sums of money at once allows customers to consider upselling attempts with better credibility
- The dealership can earn from the interest as well if they charge the customer a higher interest rate than what the lender has quoted.
- As an authorised credit broker, the dealer will also earn brokerage fees from each successful loan sale.
As any experienced car dealer will tell you, the benefits are plenty, but it all begins with a major disadvantage that comes with NOT being able to offer financing options to eager customers. The main issue is that your potential customers will be expecting dealer’s finance packages from you. When you are unable to provide them with suitable financing options, most buyers will simply find a dealer that has good finance packages for them to choose from.