Meeting the motor finance needs of well informed customers

With the so-called Freedom Days looming large starting in England from July 19th across the UK, there can be no doubt that the impact of the pandemic will continue to shape people’s lives.

Personal finances have been affected positively and negatively; it has implications for dealer finance. It will be increasingly difficult to operate with a fixed rate finance ‘one size fits all’ offer.

COVID-19 has further changed the consumer credit dynamic. While some people have been able to save money, sadly, many others have encountered financial challenges.

Alongside this have been improvements in financial literacy gained during lockdown, notably amongst the vital millennial sector.

Today, we must better meet the needs of increasingly well-informed customers across the credit curve. In car finance, one size will not fit all.

The challenges facing dealer finance in meeting customer needs are complicated by the returning lending appetite of personal loan providers.

While the pandemic saw access to a personal loan acceptance become significantly harder for many consumes, as lenders restricted lending to protect themselves from a worsening economy, things have changed.

Personal loan rates have dropped in some tiers and lenders are far more active.

A consistent theme is the promotion of competitive APRs linked to risk-based pricing, targeting the most creditworthy, but capable of rate adjustment to many other applicants.

For dealers with a fixed rate proposition, the inevitable lack of a compelling headline APR is a challenge, as is the absence of rate flexibility.

The needs and profile of potential car buyers has changed, as has their financial awareness.

Dealers can tailor a car to suit each buyer and given its linked nature; it is becoming clear that this same level of customisation should apply to finance.

It is something that would also enable dealers to use competitive APRs in their promotional activity; this is the new normal for consumer credit.”

Jon Slater is chief strategy and marketing officer at MotoNovo Finance