Dealers are being urged to unbundle the agreements they have for used car stock funding and consumer finance to avoid falling foul of new consumer credit disclosure rules being introduced by the Financial Conduct Authority.
The call comes from NextGear Capital who said dealers who bundle their stock funding arrangements with point of sale finance from the same supplier will be required to disclose any associated remuneration to customers under the FCA rules.
While linking stock funding and consumer finance with a commission rate is common practise in the sector, the amount of remuneration associated with each used car transaction could present sales staff with a complicated administrative burden.
“Any financial benefit to the dealer from a reciprocal stock funding/retail support programme would be covered by the FCA requirements but could be hard to calculate. In light of this, it is expected that dealers could seek to remove links between stock funding and retail credit,” said David Mercer, managing director of NextGear Capital.
“Stock funding and any reciprocal earning arrangements must be recognised by dealers as part of this new transparent era. The traditional F&I dealer model is undergoing a major change to create a more transparent and customer centric experience. In part this is driven by regulation but also through a more informed consumer, wanting to take a more forensic view of their vehicle financial arrangements.”
