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By Julian Rance
Director, Paragon Car Finance

IT SHOULD BE of immense concern to everybody within the automotive retailing sector that the new block exemption system is in desperate danger of having exactly the opposite effect from that which the legislators intended.

The consumer will see less competition in car retailing, less competition in car servicing and the aftermarket, and even less competition in automotive finance.

The scenario is a not an entirely favourable one for the consumer in terms of choice. The marketplace is likely to consolidate as large dealer groups absorb the small to medium sized groups - although a core of well-run small groups serving local communities will hopefully remain unscathed. And the manufacturers are going to move to control the servicing sector – not least by means of imposing a charge for training, as reported in the December 13 issue of AM.

So not only is the consumer going to have to travel considerably further to buy the car of their choice, they are also going to have to travel just as far to have it serviced.

This is a distinctly worrying scenario as we emerge from a period of intense scrutiny on our industry by consumers and their representatives. The last thing the industry needs is the creation of a quasi-consumer friendly car retailing regime which, once its failings have become blatantly apparent, only serves to further alienate the UK motor industry from its customers, the car buying public.

UK Automotive Finance PLC is not in an entirely different situation in an environment in which we could soon see just four – or even three - main lenders. I have no answer for the consumer-hostile environment which the new Block Exemption seems to have unintentionally created in terms of the UK's car retail and servicing delivery structure. But I certainly have answers for the problems in the point of sale finance sector.

Firstly, dealers are going to have to become more efficient if they are to compete with the direct lenders and will need to embrace the new technology in the market such as EDI systems for finance proposals and administration.

Secondly, the partnership between the dealers and POS motor finance lenders must become much closer and above all else must be mutually profitable for both parties.

Thirdly, dealers should behave proactively whenever faced with a customer quoting low rates from a direct lender. The arguments have been well rehearsed – POS finance is inherently competitive on the lending amounts being taken by the typical car buyer. And what is wrong with competing for that business in spite of reduced commission? By securing these deals, and in bulk, they will not only provide the customer with an excellent all-in service, but the dealer will also get some pay back from volume bonuses.

And fourthly, dealerships must look to deliver real service to the customer by looking to offer non- or sub-prime finance. The consumer credit world has changed, and POS motor finance must change with it.