AM - Automotive Management magazine January 2015 preview

www.am-online.com January 2015 £8.00

LOOKERS / P36

AUTOMOTIVE MANAGEMENT

Face to face with chief executive Andy Bruce and MD Nigel McMinn

IS YOUR BUSINESS

FIT FOR ‘15?

Are your dealerships prepared for the regulatory load they must carry over the next year?

R E G U L AT I O N / P 2 3

FCA / P 31

AUDI T T / P82

Expert help in navigating the legal minefield

Will new rules push car dealers down the pecking order?

Audi aims at UK men in world’s largest TT market

Exclusive networking opportunity – one night to meet the automotive retailing industry under one roof Book early and secure a premium table position for the AM Awards 2015

19 February 2015

www.am-awards.co.uk

For tickets and tables contact Emma-Louise Kinnaird on 01733 395133 or email emma-louise.kinnaird@bauermedia.co.uk

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Looking forward to much higher standards

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elcome to the final issue of AM in 2014, and what a year it has been. New car registrations have beaten all expectations, used car values outstripped last year, dealer average return on sales has held up, and the arrival of the Financial Conduct Authority to oversee consumer credit has not once fallen off the agenda.

For automotive managers, running dealerships in a heavily regulated environment has had to become part of the day-to-day operations. It’s not a pressure they’re unused to, given that regulation of finance and insurance has been around in several forms for years. However, dealers have described the new regime as a headache, and many as an additional cost to their business.

One thing is also certain: the FCA seems intent on allowing regulation to drive change in certain aspects of traditional motor retailing, starting with GAP insurance sales.

So now is the time to sense check the business. Is it fit for 2015? Lenders and compliance experts reveal in our FCA Update (page 31) and our insight into the changing role of the business manager (page 63) that changes are already being made in their businesses and they expect many franchised dealers to be taking similar action. At the same time, we’ve asked a selection of motor industry legal experts to pick out the other regulatory changes due in 2015 that are most relevant to dealers (page 23).

We hope this will help keep you forearmed for 2015, and may we wish all AM readers a merry Christmas, and fruitful trading in the new year.

philip nothard He is retail and consumer valuations editor at cAP, which he joined in 2010 after two decades working in motor retail, culminating in running dealerships for european motor Holdings, lythgoe motor Group and Arnold clark. In this issue (p28), he suggests dealers have become so accustomed to a strong market, any drop is painful. professor Jim Saker As director of the centre of Automotive management at loughborough University’s Business School, Saker is a key figure behind the drive for management recognition and skills in the motor retail sector.

This month (p33), he argues that licensing of the motor trade would benefit customers and staff.

The editorial team Email: am@bauermedia.co.uk Website: www.am-online.com Twitter: @amchatter LinkedIn: am-online.com/linkedin

AM Awar ds 2015 b ook your tic today at kets am-award s.co.uk

Jeremy Bennett Editor

Tim Rose Managing editor

Danielle Bagnall Senior reporter

February 19 2015 am-online.com January 2015 3

In this issue January 2015

36 63

FACE TO FACE LOOKERS’ BOSSES BELIEVE THERE’S MORE GROWTH TO COME

Your news

7

17

News digest This month’s round-up includes the FCA’s consultation on its GAP changes; Group 1 Automotive’s takeover of Bedfordia; plans to transform Mazda’s franchise; dealers’ profits take a dip; a new FCA-friendly strategy from BMW Group Financial Services; and the first new-style Land Rover site.

Finance Automotive lenders warn dealers of the dangers in failing to react to FCA changes.

14

Insight

31

Analysis

23

Navigating the legal minefield in 2015 From consumer law to pensions and holiday pay to energy audits, we round up the regulatory changes in the year ahead.

Market intelligence

12

THE ROLE OF THE BUSINESS MANAGER THE FCA IS DRIVING CHANGE, WILL YOUR BM ADAPT?

Lenders are having to put end-users’ outcomes before dealers’ needs to ensure compliance with the FCA.

33 36

New car registrations Consumer confidence drives full-year registrations total ever closer to 2.4 million.

Used car values The nationwide picture showed a volume drop and value rise in November as NAMA warns of a sudden slowdown of demand for used models.

4 January 2015 am-online.com

28

Looking at the used car market in the year ahead CAP’s Philip Nothard takes a look at what the market holds in the 12 months ahead.

Will the FCA push dealers down the finance provider’s pecking order?

45

View from the business school A professional register could be win-win for the motor trade, writes Professor Jim Saker.

Face to face: Lookers

Chief executive Andy Bruce and managing director Nigel McMinn give their predictions for the full-year new car market, and talk about how Lookers increases customer satisfction, the benefits of blended retailing and new remuneration models for salespeople.

Are technicians’ licences a seal of approval, or just more red tape?

Licensing technicians will boost

For the latest motor retail industry news, visit am-online.com Sign up to get AM news daily by email: am-online.com/newsletter

45

DEALERS AND SUPPLIERS IN THIS ISSUE:

LICENCING EMPLOYEES SEAL OF APPROVAL OR MORE RED TAPE?

TECHNICIAN’S LICENCE Name: Joe Smith Expires: 12/19

82 AUDI TT LAUNCH REPORT

generation sports car a huge opportunity for the Audi network.

consumers’ confidence in the motor trade, says the IMI, but critics warn it will increase bureaucracy.

47 53 63

AM Poll

Four out of 10 AM readers are uncertain whether their business’s culture will be FCA-compliant in 2015.

AM F&I Compliance Conference report

Mazda3

86

Seat Ibiza

87

Volkswagen Golf

Advice from the experts on meeting and conforming to motor industry-regulating bodies.

Build a better business manager

Is the role of the business manager changing in the post-FCA dealership?

Showroom

82

84

Audi TT

The UK has more customers annually for the TT than any other country, which makes the third

Mazda’s C-segment hatch is fighting hard for online visibility in a crowded and very competitive market segment.

As Volkswagen Group’s more youthful brand, Seat succeeds in attracting younger, technology-savvy buyers.

Which makes this car’s lack of digital radio all the more bewildering.

VW puts on a winter health check promotion as our Golf gets cold weather tyres.

Coming soon

90

In February’s issue – published Jan 23

Face to face with Vantage Motor Group’s Mark Robinson; an insight into the earnings potential of option packs; and the Hyundai i20 reviewed.

Adroit Automotive.....................................57. 63 Alphera Financial Services ...................31, 57 ASE .........................................................................8 Auto Trader..........................................................8 BCA.......................................................................14 Black Horse........................................12, 32, 64 Blue Motor Finance.........................................18 BMW Group Financial Services....10, 31, 63 Caffyns ................................................................10 CAP.........................................................................7 Car Finance 24/7 .............................................64 Close Brothers Motor Finance.............17, 64 Compliance Services......................................18 Corkills Volkswagen.......................................64 Dentons...............................................................24 DSG.......................................................................65 FCA .......................................................7, 8, 31, 53 FLA .......................................................................18 Freeborn Group ...............................................10 Grant Thornton.................................................60 Group 1 Automotive..........................................7 Hitachi Capital...................................................17 IMI..........................................................................45 Jacksons...............................................................7 Kia ...........................................................................7 Lawdata ..............................................................23 Lawgistics...................................................24, 26 Lookers ...................................................7, 32, 36 Luscombe Suzuki ............................................45 Manheim.............................................................14 Mapfre Abraxas................................................57 Mazda.....................................................................8 MG.........................................................................10 MHA Macintyre Hudson ........................24, 26 MILS .....................................................................24 MotoNovo............................................................17 NAMA...................................................................14 NFDA....................................................................60 Paragon Car Finance .....................................17 Park’s Motor Group ..........................................7 Pendragon............................................................8 Phoenix Car Company ...................................64 Russell Automotive Centre ..........................46 SMMT...................................................................12 Social Advisors .................................................60 SsangYong............................................................8 TrustFord.......................................................8, 12 Vauxhall.................................................................8 Vertu Motors .....................................................10 Wragge & Co.............................................56, 64

am-online.com January 2015 5

NEWS DIGEST

T H E N E W S YO U C A N ’ T A F F O R D T O H AV E M I S SE D

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F O R D A I L Y N E W S , V I S I T: w w w.am-online.com T O g E T A M ’ S F R E E D A I L Y N E W S L E T T E R , V I S I T: w w w.am-online.com/newsletter FOLLOW AM ON TWITTER: @amchatter

Dealer profitability The average dealer made a profit of £5,000 in October, a drop of £4,000 on the same month in 2013.

DEALERSHIpS

Bedfordia exits market with sale to group 1 Automotive group 1 Automotive has acquired three Bedfordia Automotive BMW/Mini dealerships.

The dealerships will continue to operate as Elms Bedford, Elms Cambridge and Elms Stansted and are expected to generate £143 million in estimated annual revenues. Based on 2013 accounts, the acquisition brings Group 1’s turnover to £695m.

US-based Group 1’s UK operations are expected to generate approximately £826m in estimated annual revenues with the addition of these sites, which will continue to operate under the Elms’ trading title. The deal also includes aftersales and service centres in Bedford operating under the Myltons brand.

FCA gAp C O N S U LT A T I O N

The Financial Conduct Authority has announced a consultation on proposals to limit the offering of gAp insurance at the point of sale.

Feedback is required by March 13. The FCA intends the rules to come into force in September.

One key proposal is for GAP distributors to provide information that encourages customers to shop around. A second is a deferred opt-in or pause in the sale, whereby a dealership’s salesperson can’t conclude the sale for a set time period, giving customers time to reconsider whether they need the product and to shop around if they do.

The FCA said it wants to promote competition in the £160 million guaranteed asset protection (GAP) insurance market.

It said add-on GAP insurance claims ratios from 2008 to 2012 averaged 10%, meaning only £10 in every £100 paid in premiums was actually paid out in claims.

JACkSONS

Jacksons, one of the largest car dealerships in the Channel Islands, is being sold to investment company Ravenscroft in a £41.7m cash and stock deal.

The sale is expected to be completed by the end of the year, subject to approval from the Jersey Competition Regulatory Authority and the Jersey Financial Services Commission. The deal includes the Jacksons and Motor Mall car showrooms in Jersey and Guernsey, Trinity Tyres in Jersey and St Martin’s Tyres in Guernsey.

The Scott family will retain an interest in the group, with Tom Scott remaining as a director. The management team will continue to be led by Paul Collier.

The purchaser, Ravenscroft Investments PCC Limited, is an investment vehicle backed by Bailiwick Investments Limited and a number of high net worth clients of Ravenscroft Limited; an independently owned investment services group based in the Channel Islands.

LOOkERS

Lookers has opened of a multi-million pound Land Rover showroom in Battersea, creating 30 jobs.

The custom-built site is the first Land Rover facility of its kind to be built in the UK. Lookers says its newest car retail facility was its most modern and environmentally-friendly yet, incorporating the very latest cloud technology which would enable staff to more freely interact with their customers and up to 24 Land Rover models.

The new Battersea Land Rover showcase building also includes lounge areas. These areas come complete with many extras, including free Wi-Fi, PlayStation consoles and games.

10

Mg MG opens its 22nd dealership this year. The new dealer opens in Coventry as part of the company’s expansion.

IN BRIEF pA R k ’S Park’s Motor Group has opened a new Mitsubishi dealership in Lanarkshire, Scotland.

The family owned business will run the franchise from a temporary showroom until its new purpose-built showroom is completed, just off the M8 motorway, in Whifflet Street, Coatbridge. Park’s will become the 16th new dealership to open this year for the growing brand.

The group currently has 45 outlets representing 20 other brands, with dealerships in Ayrshire, Glasgow, Lanarkshire, West Lothian and Fife.

CAp CAP Automotive has been acquired by Solera Holdings, a provider of risk and asset management software and services to automotive companies.

Solera already owns data firms HPI and Audatex, used by motor retailers and the accident repair sector.

Solera said the acquisition of CAP creates the only UK-based enterprise with decision support data and software solutions spanning vehicle valuation, validation, collision and mechanical repair and total cost of ownership.

kIA Kia dealers can now send videos of service work required directly to owners.

Kia Klear-Vision – powered

by CitNoW – uses apps to advise customers that urgent or important work is needed.

This vehicle health check tool reinforces Kia’s family-like care by building trust amongst Kia customers and dealers, by improving the conversion of identified “red” and “amber” maintenance work at Kia service centres.

am-online.com January 2015 7

NEWS DIGEST FCA FEES

Major franchised dealers could be hit with demand for up to £7,500 in fees when they file their consumer credit application to the Financial Conduct Authority.

Louise Wallis, head of business development at the National Franchised Dealers Association, said it has discovered that dealers applying for full FCA permission because they already have that permission for insurance are actually being categorised in the FCA’s ‘complex’ category, which incurs higher costs.

That makes them liable for FCA application fees of £3,750 if their annual income from consumer credit exceeds £250,000. In addition, they are liable for £7,500 if it exceeds £1 million.

Wallis said this is because they are applying for variation of permission with categories D and E for debt management and debt counselling and that it is this category of application that incurs the extra fees.

Such categories are necessary in order for dealers to settle outstanding finance on partexchange cars when the customer wishes to change.

SSANGYONG

SsangYong dealers will get a new sales opportunity next summer with the arrival of the Tivoli, a B-segment crossover SUV. Based on the X100 concept car, the Tivoli will include four wheel drive or two wheel drive variants, diesel engines and high levels of standard equipment, and is likely to be priced some 10% below mainstream rivals such as the Renault Captur and Vauxhall Mokka.

SsangYong UK managing director Paul Williams (pictured) said Tivoli opens a new market segment for the Korean niche brand.

Williams has a medium term aim of growing SsangYong’s UK sales to 7,000 units.

Currently, he admits it will have done well to reach 2,000 registrations this year.

8 January 2015 am-online.com

T O R E A D A M ’ S D A I L Y N E W S L E T T E R , V I S I T: w w w . a m - o n l i n e . c o m / n e w s l e t t e r

MAZDA

By Christmas 2015 the current Mazda franchise will be “unrecognisable”, according to its UK managing director Jeremy Thomson.

By end of next year, 97% of the new cars Mazda dealers sell will be the carmaker’s latest Kodo design with Skyactiv technology which is already seen on the CX-5, Mazda6 and Mazda3.

Replacements for the Mazda2 supermini and MX-5 roadster will enter showrooms in 2015 and a new market segment will be opened for Mazda dealers with the arrival of the CX-3 B-segment crossover before the end of the year.

By March next year 80% of the Mazda UK network will have the brand’s new corporate identity in place.

Dealers can see the new identity’s importance in showcasing the new models, Thomson said, and the UK is probably the foremost market in adopting it.

Mazda UK is supporting its dealers with a three-year interest free loan to fund the changes.

D E A L E R P R O F I TA B I L I T Y

Despite strong vehicle registration numbers, dealers have been struggling to match their 2013 profit comparatives in the first two months of a quarter, with quarter-end bonuses boosting results.

PEOPLE NEWS STEVE HOOD Ford’s own car dealer group, TrustFord, has appointed Steve Hood as chief operating officer.

Hood previously headed online operations, and most recently was its strategy director, before moving to Ford of Europe as director of sales operations.

PENDRAGON Pendragon has announced that Jeremy King has been appointed as an independent non-executive director of the motor retail group with immediate effect. King has extensive transaction and advisory experience, and he joins Pendragon following a career with PwC, retiring in December 2013.

CHR I S H AW K EN

This trend, said ASE, has continued in the first month of quarter Rolling Rolling four, with the average 12 12 Bench dealer making a profit KEY Ratio months months -mark Oct Oct of £5,000, a drop of 2014 2013 £4,000 on the prior year Net Profit as % 1.47% 1.41% 3.0% Sales result for October.

Overhead 56.0% 56.6% 80% “This was in spite of Absorption turnover being 12% Used: New Sales 0.86:1 0.91:1 1.5:1 Vehicle Sales up in the month, with Expenses as % 62.1% 62.7% 50% both new and used car Gross Sales per sales rising compared 195 202 150 Salesman to the prior year,” said Used Vehicle 54.5 56.5 45 Stockturn (days) ASE chairman Mike Return on Used 80.2% 79.3% 100% Jones.

Car Investment Overall Labour “This should, once 82.1% 80.9% 100% Efficiency again, prove positive for Service Gross 75.8% 75.8% 75% Profit % on Labour the overall quarter Service Expenses 57.7% 56.7% 40% result once the bonuses as % Gross Hours per Retail 1.65 1.64 2.5 are released. However, Job Card Parts Gross Profit we would expect 22.2% 22.3% 22% % November to follow the Parts Expenses as 44.6% 44.7% 40% % Gross pattern and fail to Parts Stockturn 8.11 7.87 8.0 match 2013’s result.”

J C T6 0 0 CONTRACTS

AUTO TR ADER

GITI TIRE

Auto Trader has announced a new strategic partnership with vehicle data provider Glass’s which it says will enable the development of new ways to search and present vehicles.

The 10-year contract comes after CAP, which has provided vehicle data until very recently for Auto Trader’s valuations service and stock management product i-Control, “re-shaped” its partnership with Auto Trader. Auto Trader said it continues to use CAP for a number of its products outside vehicle data services.

The classified motor advertising firm said its aim is to enable consumers to get more relevant search results and to find the car they are looking for more quickly. “Glass’s has a reputation for working closely with partners to innovate and add value beyond high quality vehicle data,” said Trevor Mather, Auto Trader managing director.

Vauxhall Motors has appointed Chris Hawken as director of brand marketing.

He will be responsible for optimising all brand communication and media placement for brand development and sales lead generation.

JCT600 Contracts has appointed Paul Walters as its new sales director. Based at Apperley Bridge, JCT600 Contracts is a standalone business within JCT600, specialising in leasing and fleet management. Walters will facilitate future strategy.

Giti Tire has promoted Ashleigh Warren to UK marketing manager for its passenger car and light truck division. Working across Giti’s brands, which include GT Radial, Primewell and Runway, she will work with distributors on retail, product and media strategies, as the company aims to augment its independent dealer network and expanding tyre portfolios.

market intelligence 14

17

Used cars

the latest national data shows wholesale volumes dropped in november as retail demand eased.

the news in depth

Finance

lenders urge dealers to grasp new opportunities in 2015, yet warn of dangers ahead for those who fail to react to change.

n e w c a r r e g i s t r at i o n s

November up 8% in 33rd straight month of growth consumer confidence drives full-year registrations total ever closer to 2.4 million volUme split

need to know n november registrations up 8% year-on-year to 172,327 units n Year-to date total tops 2.3m

By Jeremy Bennett onsumer confidence continues to light a fire under the new car market, with november seeing the 33rd consecutive month of growth, with total registrations up 8% on last year to 172,327 units. it brings the total for the year to november to 2,310,237, a rise of 9.4%. total sales in 2013 were 2,264,737, a 10.8% increase on 2012.

c

November 2014 2013 % change Mkt share ‘14 Mkt share ‘13 Year-to-date 2014 2013 % change Mkt share ‘14 Mkt share ‘13

Total 172,327 159,581 8.0%

Total 2,310,237 2,111,819 9.4%

share oF new car market bY segment

Dual purpose, multi purpose

Executive, luxury saloon, specialist sports

Lower medium, upper medium

Mini, supermini

12 January 2015 am-online.com

Diesel 88,376 83,962 5.3% 51.3% 52.6% Diesel 1,155,801 1,046,467 10.4% 50.0% 49.6%

Petrol 79,075 73,247 8.0% 45.9% 45.9% Petrol 1,107,026 1,034,856 7.0% 47.9% 49.0%

AFV 4,876 2,372 105.6% 2.8% 1.5% AFV 47,410 30,496 55.5% 2.1% 1.4%

mike hawes, society of motor manufacturers and traders chief executive, said: “Six months after the record was broken for consecutive monthly growth in new car registrations, the market continues to march on. “today’s figures are an indication of the continuing economic confidence that is driving the new car market, with business, fleet and private registrations all showing strong rises in the month.

“We expect a more stable market in 2015.” chris sutton, managing director of finance provider black horse, said: “clearly, cheap and affordable finance continues to play a positive role in the purchase of new cars, in particular the use of PcPs (Personal contract Purchases), which is attractive to car buyers given the current low interest rate environment that Uk consumers continue to benefit from.

Private 77,460 72,880 6.3% 44.9% 45.7% Private 1,114,784 1,013,548 10.0% 48.3% 48.0%

Fleet 86,090 79,968 7.7% 50.0% 50.1% Fleet 1,080,577 1,000,066 8.1% 46.8% 47.4%

Business 8,777 6,733 30.4% 5.1% 4.2% Business 114,876 98,205 17.0% 5.0% 4.7%

“Strong business confidence is also likely to have a positive impact on car sales, as more businesses feel confident to increase purchases of company cars and expand their overall fleet capacity.

“Finally, there has been much speculation on when the good news will come to an end, but we are confident of a good start to 2015 for both manufacturers and dealers.” trustFord’s operations director, John leeman, said: “the national performance has been mirrored at trustFord. across our network of dealerships, we have seen a total retail increase of 11.6% year-to-date and a monthly increase of 20%.

“We’re starting to see a real shift within the industry, representing an exciting time for dealerships. Dealers are now acting more like traditional retailers, where premium customer service and in-store experience are pivotal.”

market intelligence New car registrations n E W C a r r E G I S T r aT I O n S

10 -Y E a r M a r K E T T r E n D S aVa I l a B l E : w w w.am-online.com/ami

november Marque Ford Vauxhall Volkswagen BMW audi nissan Mercedes-Benz Peugeot Toyota Hyundai Citroën renault Škoda Kia Fiat Mini Volvo Seat Land rover Honda Mazda Suzuki dacia Mitsubishi Jaguar Lexus Porsche alfa romeo Jeep Subaru MG Smart SsangYong abarth Bentley Maserati Chrysler Lotus aston Martin Infiniti Perodua Chevrolet Mia Proton Saab Other British Other imports Total

2014

% market share 19,159 11.12 16,653 9.66 16,196 9.40 12,355 7.17 11,594 6.73 10,752 6.24 8,808 5.11 6,772 3.93 6,037 3.50 5,952 3.45 5,925 3.44 5,686 3.30 5,409 3.14 5,099 2.96 4,739 2.75 4,643 2.69 3,613 2.10 3,559 2.07 3,370 1.96 2,954 1.71 2,360 1.37 2,167 1.26 1,729 1.00 1,497 0.87 1,291 0.75 1,138 0.66 916 0.53 374 0.22 347 0.20 208 0.12 170 0.10 130 0.08 124 0.07 113 0.07 73 0.04 70 0.04 52 0.03 42 0.02 41 0.02 23 0.01 2 0.00 0 0.00 0 0.00 0 0.00 0 0.00 50 0.03 135 0.08 172,327

2013 21,027 19,669 13,230 10,307 9,617 8,040 7,867 6,318 4,812 5,442 5,499 4,720 5,578 4,893 4,455 3,754 2,515 3,335 3,806 3,157 1,980 2,262 2,026 426 1,017 616 747 462 239 199 75 329 61 84 100 32 90 24 57 20 3 599 0 0 0 57 35 159,581

5

Year-to-date % market share 13.18 12.33 8.29 6.46 6.03 5.04 4.93 3.96 3.02 3.41 3.45 2.96 3.50 3.07 2.79 2.35 1.58 2.09 2.38 1.98 1.24 1.42 1.27 0.27 0.64 0.39 0.47 0.29 0.15 0.12 0.05 0.21 0.04 0.05 0.06 0.02 0.06 0.02 0.04 0.01 0.00 0.38 0.00 0.00 0.00 0.04 0.02

% change -8.88 -15.33 22.42 19.87 20.56 33.73 11.96 7.19 25.46 9.37 7.75 20.47 -3.03 4.21 6.37 23.68 43.66 6.72 -11.46 -6.43 19.19 -4.20 -14.66 251.41 26.94 84.74 22.62 -19.05 45.19 4.52 126.67 -60.49 103.28 34.52 -27.00 118.75 -42.22 75.00 -28.07 15.00 -33.33 -100.00 0.00 0.00 0.00 -12.28 285.71 7.99

2014

% market share 306,134 13.25 246,015 10.65 200,353 8.67 136,433 5.91 150,974 6.54 129,576 5.61 116,645 5.05 98,057 4.24 88,325 3.82 77,408 3.35 78,215 3.39 61,172 2.65 70,873 3.07 73,618 3.19 63,166 2.73 46,489 2.01 38,343 1.66 49,620 2.15 52,548 2.27 50,084 2.17 36,069 1.56 35,342 1.53 22,359 0.97 14,443 0.63 17,045 0.74 10,863 0.47 8,347 0.36 5,194 0.22 3,589 0.16 2,564 0.11 2,198 0.10 4,329 0.19 1,466 0.06 1,516 0.07 1,364 0.06 1,088 0.05 1,833 0.08 230 0.01 791 0.03 667 0.03 29 0.00 2,774 0.12 5 0.00 1 0.00 3 0.00 738 0.03 1,342 0.06 2,310,237

2013 291,369 238,142 180,360 124,113 134,598 110,927 102,837 99,196 83,606 72,161 74,483 40,801 60,795 68,303 56,138 47,922 30,138 41,706 51,687 52,292 29,786 30,818 15,099 8,281 15,217 8,385 7,483 5,374 2,039 2,061 384 5,010 628 1,298 1,156 303 2,466 193 848 365 205 11,281 5 20 3 735 802 2,111,819

% market share 13.80 11.28 8.54 5.88 6.37 5.25 4.87 4.70 3.96 3.42 3.53 1.93 2.88 3.23 2.66 2.27 1.43 1.97 2.45 2.48 1.41 1.46 0.71 0.39 0.72 0.40 0.35 0.25 0.10 0.10 0.02 0.24 0.03 0.06 0.05 0.01 0.12 0.01 0.04 0.02 0.01 0.53 0.00 0.00 0.00 0.03 0.04

% change 5.07 3.31 11.09 9.93 12.17 16.81 13.43 -1.15 5.64 7.27 5.01 49.93 16.58 7.78 12.52 -2.99 27.22 18.98 1.67 -4.22 21.09 14.68 48.08 74.41 12.01 29.55 11.55 -3.35 76.02 24.41 472.40 -13.59 133.44 16.80 17.99 259.08 -25.67 19.17 -6.72 82.74 -85.85 -75.41 0.00 -95.00 0.00 0.41 67.33 9.40

BIGGEST GrOWErS Y E a r T O D aT E

1 2 3 4 5 6 7 8 9 10

Brand MG Maserati SsangYong Infiniti Jeep Mitsubishi Renault Dacia Lexus Volvo

YTd (%) 472.40 259.08 133.44 82.74 76.02 74.41 49.93 48.08 29.55 27.22

With only one month’s registrations figures to come in 2014, it looks like MG cannot be knocked off its perch as the UK’s fastestgrowing car brand in 2014.

However, rapid growth is easy from small volumes. Perhaps more credit is due to Mitsubishi, renault, Dacia and Volvo – they added over 40,000 combined registrations year-to-date. among the fallers, apart from brands such as Proton, Chevrolet and Chrysler, which have all but given up on the UK, Smart and Honda will be expecting better fortunes in 2015 as new models arrive.

Brand 10 Peugeot 9 Mini 8 Alfa Romeo 7 Honda 6 Aston Martin 5 Smart 4 Chrysler 3 Chevrolet 2 Perodua 1 Proton

YTd (%) -1.15 -2.99 -3.35 -4.22 -6.72 -13.59 -25.67 -75.41 -85.85 -95.00

BIGGEST fa l l Er S Y E a r T O D aT E

8 am-online.com January 2015 13

#AMAUTODIGI

12 February 2015 The NEC, Birmingham, B40 1NT

AM and Auto Trader’s Digital Marketing Conference – one of its most well attended events of the year – is back for the third year running.

The conference will cover the latest in digital marketing, exploring new thinking, insights, trends, statistics, facts and figures in this fast moving arena.

Experts will also look at likely future developments and provide essential practical tips which can be implemented on return to your businesses.

Why should you attend?

Who should attend?

The digital landscape is constantly shifting, creating a fast-moving environment where it is difficult to keep pace, let alone stay ahead. Quite simply, dealers cannot afford to be left behind.

• Anyone with a vested interest in ensuring a dealership or dealer group’s digital strategy is far reaching and highly effective.

• Sharpen your digital marketing skills and stay ahead of the competition • Gain deeper insight into customer expectations and digital trends • Understand latest developments and their potential impact • Enhance your digital strategy to further improve ROI • Learn how to deliver a connected customer experience • Increase digital knowledge and apply lessons from digital marketing experts • Capitalise on the experience of others and share best practice • Network with colleagues and learn from others

• Marketing managers and marketing executives who need to manage, implement and measure their digital marketing strategy.

• Dealer principals and senior managers that want to gain an insightful overview.

• Sales managers who want to understand how the digital world can boost the bottom line.

• Aftersales managers and CRM employees looking to increase customer loyalty.

• Manufacturers and dealer groups who want to gain a greater understanding of how digital marketing applies to automotive retail.

Book your tickets now at: www.amdigitalmarketing.co.uk

Conference schedule 08.30

Registration & networking

09.30

Welcome Jeremy Bennett, editor, AM and Ginny Buckley, conference chair

09.40

Opening address Chip Perry, non-executive board member, Auto Trader As former president and CEO of Autotrader.com in America, Perry will take to the stage to provide the company’s view on the ever-changing digital landscape. With more than 11.5 million unique users carrying out in excess of 140 million searches on new and used vehicles every month, Auto Trader has a unique window into the digital journey of today’s car buyer.

10.10

Promotions and compliance – how to harness F&I in the digital world Simon Ryan, managing director, Social Advisors By working with a franchised dealer, Ryan will present real life examples and results to illustrate how dealers can harness F&I in the digital environment.

This session will provide dealers with the insight they need to navigate this complex area and stake their claim in an as yet uncrowded social space.

10.35

Q&A session

10.45

Refreshments & networking

11.05

Dealer case study Chris Harris, marketing and customer director, HR Owen With typically time poor and technologically informed consumers, HR Owen, one of the UK’s leading premier and luxury automotive retailers, has focused on delivering targeted and sophisticated digital communications.

Harris will provide an insight into their highly successful approach.

Early bird rate £175+VAT

for dealers and manufacturers if booked by the 19 January 2015

11.30

Aftersales in the digital sphere Alex Rose, marketing director, Whocanfxmycar.com Digital now forms a vital aspect of operating a proftable aftermarket business, yet many dealers have yet to apply the same levels of innovative thinking as they do for new and used car sales. Rose will draw on digital offerings from the insurance and holiday sector to explore ways in which aftersales can improve their own presence in line with consumer expectations.

11.50

Q&A session

12.00

Workshop sessions

13.00

Lunch & networking

14.00

Workshop sessions (repeated)

15.00

Refreshments & networking

15.20

The digital showroom Speaker invited As the digital aspect of our car buying experience moves beyond the internet and into the store itself, we ask if the dealership as we know it will be confned to the history books with sales staff-free showrooms and interactive digital confgurators replacing the car display becoming the norm.

15.40

Omni-channel marketing – the future of digital retailing Speaker invited Omni-channel is the next step for retailers and is essentially about doing multi-channel marketing right.

The key difference being that omni-channel marketing offers a seamless brand experience across all channels (mobile, tablets, computers, television, direct mail, social media and bricks and mortar) and puts the customer at the centre of the experience. This session will offer an overview of who is doing it right on the high street and share hints and tips that can be replicated in automotive retailing.

16.05

Q&A session

16.15

Workshops An interactive and informal opportunity for delegates to choose two of the three workshop sessions and focus on specifc areas of interest.

Workshop 1

Is your website legal?

Andrew Brennan, intellectual property and technology lawyer, SGH Martineau Websites must comply with a number of different laws, particularly those relating to data protection, direct marketing and consumer rights. This session will cover the minimum legal requirements for all business websites, common mistakes and special website considerations for specifc business sectors.

Workshop 2

Today’s car buying journey Stuart Bluck, head of research & insight and Rakesh Patel, digital sales director, Auto Trader Bluck and Patel will illustrate how Auto Trader’s own journey mirrors that of today’s car buyer, from print-based information sourcing to a highly sophisticated digital experience.

Auto Trader will draw on its vast digital background and wealth of data to explore online consumer behaviour and share with you how they have been working in conjunction with a number of franchised groups, car supermarkets and independent dealers to understand the journey their car buyers went on to purchase from their dealerships.

Workshop 3

In today’s digital age, is it easy for a customer to buy a car?

Nick King, market research director and Peter Watts, brand director, Auto Trader King and Watts will be asking if the new consumer car buying journey is refected in the way we treat customers when they turn up to buy a car. They will also be offering a wealth of hints and tips on what we can learn from this and what strategies we can put in place to capitalise and win.

Summing up and departure

or contact Emma-Louise Kinnaird on 01733 395133 or email emma-louise.kinnaird@bauermedia.co.uk

MArKeT INTellIgeNCe Used car values

Mixed fortunes for used cars Part-exchanges up, but other ex-fleet sales figures more complex in latest auction results Need To kNow

Av e R A g e U S e d vA l U e S B Y S e C T o R – R o l l i N g Y e A R

n dealer values increase for third month n Average value of Manheim ex-fleet stock 8.5% lower, year-on-year, with vehicles generally months older

By Tim Rose he nationwide picture of November’s used car market from the National Association of Motor Auctions (NAMA) showed sales volumes were down 14% month on month at 88,288 cars and 7% compared with November 2013. NAMA said the slowdown was more pronounced than many members expected.

In addition, the proportion of cars sold on first presentation at auction dropped to 76% from 80%. The average price premium earned by those cars was 3% or £175, £50 less than the previous month’s premium. Nevertheless, the average sales price increased by 9% since October to £5,736, which was also 6% higher than a year previously.

NAMA’s report stated: “The used car market merely stabilised during the final weeks of November at a level that could only be described as acceptable. Used car customers were in evidence, but in lower volumes and they tended to know exactly what they wanted to buy and exactly the price they wanted to pay. This gave dealers a clear choice on whether they were able or prepared to do business at the level the customers demanded.”

T

Trade-in disposals The UK’s largest motor auction group, BCA, reported that its average value for dealer part-exchanges in November rose for the third consecutive month, by £52, to £4,188, setting a new record. Year-on-year November values were ahead by £331 or 8.5%. The average age of part-exchanges was a month higher than that of a year previously at 88.8 months.

At Manheim’s auction rooms the average part-exchange value for October was up 0.2%, or £5 month-on-month to £3,395. Year-on-year the average value was 7.3%, or £233 higher. The market as a whole is seeing a shift towards condition, rather than age and mileage, being chief value influencer, and this month’s figures attest to that. “There’s

BCA said the average value for dealer part-exchanges rose to £4,188 in November plenty of life in an older unit, assuming it’s been properly looked after,” said daren wiseman, valuations services manager at Manheim Auctions. “This year has been particularly impressive for dealers, with 12 consecutive months of value appreciation, which bodes well for the year ahead.

“I’d expect values to fall in line more with the seasonal average as the market continues to settle. However, that doesn’t mean dealers can’t enjoy another fruitful year.”

Stock acquisition Manheim’s market analysis for November showed the average selling price of ex-fleet vehicles dropped for the fourth consecutive month to £6,948, a month-on-month slump of £97 or 1.4%. The average value was also £645 or 8.5% lower yearon-year. The auction group said defleeted vehicles were, on average, seven months older and with some 6,000 more miles than at the same point in 2013.

BCA saw its average ex-fleet car value climb 1.04% or £100 month on month. The average figure of £9,533 was 3.5% or £332 ahead, year-on-year. BCA’s Uk operations director Simon Henstock said: “Professional buyers will remember that average values rose sharply last December due to the shorter trading month and the ongoing dearth of retail-quality stock. There will be interesting dynamics at play now.”

YeAR-oN-YeAR Fleet/leasing Nov 2013 39.28 Nov 2014 39.63 45,436 47,257 £9,301 £9,633 96.02% 94.66%

Part-exchange Nov 2013 87.58 Nov 2014 88.76 73,255 71,269 £3,857 £4,188 94.90% 93.87%

Nearly new November 2014 7.59 8,707 £21,677 98.82% Average age (months) Average mileage Average value Sales vs CAP

14 January 2015 am-online.com

InSIghT AM F&I Compliance Conference

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Compliance and how to achieve it

read extended versions of these reports online at: am-online.com/ Amcompliance

Advice from the experts on meeting and conforming to industry-regulating bodies ViewpoiNt From tHe FCA

Need to kNow n Companies need to consider their business and its practices from customers' point of view n Authority spells out five factors essential to meeting the standards of authorisation and compliance Francisco esteves, manager, consumer credit sector team, FCA Authorisation “Prepare, prepare, prepare” was the advice from Francisco Esteves, manager at the Financial Conduct Authority (FCA), who revealed that with six weeks to go until the end of the first landing slot, the FCA had yet to receive a fully completed application form for authorisation to sell finance products from the motor retail sector.

“You may think you have applied the rules in your business, but we may come along with a different view. It’s important to communicate with us.”

Esteves said if dealers were previously directly authorised under the previous regime, they cannot also apply for limited permissions, since they are already directly authorised.

Directly authorised dealers have two options: remain directly authorised and apply for full permission (apply for a “variation of permission” to add consumer credit activities to their permissions); or become an appointed representative. If the latter is your choice, Esteves said, engage with a principal firm and make sure it has its own plans in place and is ready for the dealer’s application timeframe.

To help firms become authorised, the FCA will send dealers a creditready pack six months before the application period. Three months before it, the FCA will run a webinar offering guidance for the sector. supervision Esteves said the FCA is looking for “suitable, sustainable and well controlled business models”. In detail, this means how does your business make and lose money (and

“You may think you have applied the rules in your business, but we may come to a different view” therefore is sustainable) and does your firm intend to expand or contract.

Finally, does your business model operate in the interests of customers?

The FCA believes five factors are essential: 1. Advertising in pre-contract information is fair, clear and not misleading 2. Anyone providing loans takes appropriate steps to assess affordability 3. Anyone trying to recover debt exercises appropriate forbearance to the customer 4. If giving advice, the solutions must be suitable; they take into account the customer’s circumstances and are accessible 5. Businesses must be sustainable, well controlled and focused on doing the right thing for customers.

Affordability Consider whether customers’ payments are affordable now and in the future, said Esteves.

Advice

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The FCA will be asking companies about how well staff understand suitability, the need to consider customers’ best interests, the checks and procedures in place to ensure consistency, how customer feedback is collated and how complaints are handled.

Forbearance This includes suspending, reducing, waiving or cancelling interest or charges, deferring arrears where immediate payment is not sustainable, accepting token payments for a ”reasonable period of time” to allow recovery from an “unexpected income shock”, allowing a reasonable time to repay debt and recommending customers to free, independent debt advisers. incentives and remuneration A key question when considering these factors is: have you considered what impact your remuneration strategy could have on the advice you provide customers?

The answers, Esteves said, will come from identifying if features of these schemes increase the risk of mis-selling, reviewing if they have controls to manage the above risks and managing the risks from sales targets: “They need to be balanced with good customer outcomes.”

To ensure the above, every firm will be assessed at least every four years by the FCA supervision team.

FCA contact details: www.fca.org. uk; 0300 500 0597 (free helpline) and firm.queries@fca.org.uk

am-online.com January 2015 53

InSIghT AM F&I Compliance Conference GAps iN deAlers’ CompliANCe proCedures

Need to kNow n 30% of businesses are likely to be getting their application forms wrong, says wragge & Co n Firms are still unclear as to what good practice looks like Qamar Aziz, associate, wragge & Co Application About 30% of dealers are likely to be getting their application forms wrong, said Qamar Aziz, associate at law firm Wragge & Co. But she emphasised that the FCA would alert dealers in the event of errors that typically occur when choosing the correct categories, credit broking (category C), debt adjusting (category D) and debt counselling (category E).

“As a minimum, you are likely to need these categories.”

Full and limited permissions For the above activities, dealers don’t need full permission. “You can still apply for limited permission provided you don’t engage in other high-risk activities that require full permission,” Aziz said.

She also highlighted the problem of motor dealers already fully authorised for insurance sales that then can’t apply for limited permission for consumer credit sales, even though their business model may have been suitable – a factor affecting 50% of dealers. “The FCA has now said such firms can opt to apply limitations to their authorisation applications. If successful, it triggers a lighter touch authorisation process. It is still full authorisation, but with limitations.”

Adjusting to the new regimes Authorised firms are now being watched by a much more proactive

56 January 2015 am-online.com

regulator and there will be more of a need to evidence compliance. So, focus on ensuring: 1. Staff are properly trained in dealing with customers fairly 2. They are recommending the right products with the appropriate information to ensure the best outcome for customers 3. Monitoring and oversight: “A second pair of eyes to look at finance proposals before they are submitted”, particularly with new staff 4. Adequate records are kept to show to the FCA. treating customers fairly “Point of sale disclosure is absolutely crucial in ensuring customers understand product characteristics and dealers, as credit brokers, have a specific obligation to pay regard to a customer’s needs and circumstances when giving explanations and advice, or making recommendations.” This includes whether the product is affordable over the period of the finance agreement.

“There’s still uncertainty on what needs to be done and what good looks like, but ultimately best practice will have to be agreed by the sector in conjunction with the FCA,” said Aziz. “In the meantime, the FCA has said it is not expecting one single approach and will supply further guidance, the emphasis being on outcomes, rather than prescriptive rules.” Aziz said that while there is no FCA requirement to have customers fill in a “demands and needs” questionnaire, it is an approach clients are recommending to dealers: “You can design your own questionnaire to ensure a consistent approach.” information requirements: adequate explanations When proposing credit up to £60,260, dealers are expected to provide adequate explanations, but some lenders now provide it for all regu-

“Dealerships are considered a highpressure environment where customers are at risk of making a wrong decision” lated credit, again for consistency.

Customers should be advised to consider the information given. information requirements: commission disclosure A dealer must disclose commissions or fees payable (including introducers and arrangement fees, overrider or non-cash benefit) if it could affect impartiality or affect the customer’s decision. “It’s difficult to see a situation where a commission is payable and it couldn’t have that effect,” Aziz said.

Vulnerable customers Vulnerable customers are likely to be those on low income, with high debt levels and a lack of savings. Dealerships are considered a high-pressure environment where customers are at risk of making a wrong decision.

Dealer staff are expected to explain

options clearly and fully and, if a customer does not have a good understanding of English, consider giving information to a friend or relative to translate. incentives “Any volume-based bonus or incentive is unlikely to meet with the FCA’s approval unless it can be justified by the level of work involved,” Aziz said.

The same applies to commission that varies by product type.

Financial promotions Aziz said one in five advertisements across all sectors were noncompliant. Common failings were: lack of clarity on credit and ownership, APR and representative examples being not clear enough, not providing risks and the finance or price not applying to the vehicle shown.

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tHe eVolViNG role oF tHe BusiNess mANAGer

Need to kNow n income should be based on customer satisfaction, not sales n Big mark-ups and commissions to come under scrutiny Adrian Foster, managing director, Adroit Automotive The car dealer’s interest in finance and insurance has to change from being all about making money to being about attracting and retaining customers, according to Adrian Foster. Foster believes the FCA will question whether it is fair to the

customer if dealers charge a big mark-up on the base rate and earn commission linked to the sale.

Foster outlined to delegates the Retail Distribution Review (RDR) put in by the FCA in 2013 in the life and pensions sector. The aim of the RDR was to remove commission bias in financial advice. Foster believes the FCA will similarly look for induce-

“Happy customers are likely to return if they benefit from a better experience”

ments from product providers and commission bias in the motor retail sector. “Our interests aren’t aligned with our customers’. If I’m selling a product and I only earn when you buy it, we have a fundamental difference there, and that’s what the FCA is getting at,” he said.

Foster believes rate spread, profit per unit and add-on profit per unit will not be compatible with the FCA’s principles. “Measuring our success in the showroom by the amount of profit we’re able to charge our customers is not the way the FCA wants us to think.” he referred to a recent FCA fine of former Swinton Insurance directors for putting in a culture of high sales and increased profit without regard

for the impact on its customers. he said a cultural change is necessary, with dealers and their employees being paid on customer satisfaction, not on sales. A broader range of products should also be offered. “happy customers are repeat customers. If we provide a business manager who’s ensuring there’s a positive culture, ensuring the customer has a positive experience, ensuring all these products are explained carefully with the pros and the cons, the customer benefits from a much better experience.”

Foster suggested fixed retail rates will come, leading to lower prices, but sales penetration should increase.

■ read ‘Build a better business manager’ on page 63

New erA For FCA BriNGs BeNeFits

Need to kNow n dealers need to take principles and culture seriously, making transparency paramount n Flat rates of commission, abolition of fees and fixed interest rates may improve the deal for customers

tHe Future oF GAp

Need to kNow n dealers should note the positive aspects of GAp, remembering that it meets a genuine need n mapfre Abraxas has challenged the FCA’s concerns about dealers’ sales of insurance add-ons in meetings with the FCA rob dyer, mapfre Abraxas marketing manager Dealers ought to consider their own gAP retail pricing strategy to ensure they remain competitive against the wider market.

Rob Dyer, of gAP provider Mapfre Abraxas, said dealers could review their insurance distribution costs, such as training, salaries, overheads and compliance. That can then guide the dealer on what is the right profitability and pricing strategy. his advice was aimed at preparing dealers for the outcome of the FCA’s study into general insurance add-ons, including gAP insurance. Although the FCA’s final plans for the market are

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not yet determined, it has proposed measures that could impact on any car dealer’s ability to sell gAP. however, Dyer said that, in meetings with the FCA, Mapfre Abraxas has challenged its concerns about dealers’ sale of gAP insurance add-ons. The FCA considers dealers have a point-ofsale advantage with gAP sales.

Mapfre has countered that good penetration for gAP is 40%, and the average is between 20-40%. had penetration been at 90% there would be a good case for a point-of-sale advantage, Dyer said.

Mapfre said encouraging customers to shop around online, another FCA proposal, means them going from an advised sales channel to a nonadvised one. The FCA is considering requiring a deferred sale to counter any point-of-sale advantage. Dyer said there is already a mandatory 14-day cooling off period in any case.

Dealers should remember the positives of gAP – that it is a product that meets a genuine need. Dyer said the Financial Ombudsman Service received only 247 complaints regarding gAP in the past year. “The FCA acknowledges that gAP provides a valuable protection.”

Andy Gruber, director, Alphera Financial services What does the FCA stand for and why is it so important to comply? To put it simply, the FCA is the consumers’ voice and it is about putting them at the forefront of what we do, Andy gruber explained.

The FCA is principle-based and culture-focused – dealers need to take this seriously, said gruber. Transparency is paramount and if you can’t evidence that something has happened, then it “never happened”.

The FCA will ask you to show it there was fair transparency in a deal.

There is a lot of room for interpretation: the FCA has given its key principles, but hasn’t said exactly how to do things, so each dealer and finance company could interpret and implement each differently.

“You must appear to be lenders – and not just after a sale. A fair and transparent work ethic across the industry will deliver financial products in an easy way. Customer satisfaction will go up, customer retention will go up and, most importantly, customer trust levels will increase too – all down to transparency and

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having confidence in the sales process that they go through when buying a car,” gruber said.

“The implementation of FCA guidelines could mean – and I’m not saying that this is the all-solving solution, this is just to spark thought – if you were to go down the fixed interest rate, it would give the same rate to

“A fair and clear work ethic across the industry will deliver products in an easy way” the customer. You could think about having the same commission for each deal. You could get rid of fees.

You could pay the same commission for all products. You could pay the same commission for all terms. All these ideas would be very easy to implement and easy for sales people to understand, making it easier for them to confidently sell finance.“ In gruber’s tried-and-tested example, penetration rate went up from 40% to 52% – sales people felt empowered to talk about finance and felt comfortable. however, there is a real danger that income per retail unit will go down. however, the bottom line went up by 11%, with more units being sold.

Initially, it will be difficult to get the lenders talking on the same page but, overall, compliance has big benefits for the industry, he said.

am-online.com January 2015 57

InSIghT AM F&I Compliance Conference

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mArketiNG: oNliNe soCiAl mediA

Need to kNow n Companies must keep in mind online postings are public and permanent n Building brand awareness online is easier than ever before

leArNiNG lessoNs From tHe reGulAtioN CHANGes iN tHe mortGAGe mArket

Need to kNow n Costs of mortgages have gone up since regulation came into place n Focusing on good customer outcomes ‘starts at the top’, with the board and senior executives tony moroney, director of banking and mortgages, Grant thornton Tony Moroney drew parallels between regulation of the mortgage market and the FCA’s regulation of consumer credit and detailed some of the impact of the FCA’s mortgage market review six months after its implementation.

As a result of regulation, the cost of providing a mortgage has gone up, the customer experience has deteriorated, and the FCA is still not happy with everything that’s happening in the mortgage market, he said.

Last year, the FCA fined financial institutions £474 million; this year the fines will exceed £1.5 billion. Much of that was about customer service.

“It really does come back to focusing on good customer outcomes, and that starts at the top.

If the board and senior executives are not setting the agenda clearly in terms of being customer-focused and making profits that are not at the expense of customers, the organisation will fail,” he said. The regulator doesn’t mind you making money, but it can’t be at the customer’s expense.”

Mortgage sector regulators look for evidence of a sound business, with a sound strategy and robust controls.

Management information, customer feedback and evidence of compliance is critical.

It means mortgage lenders need qualified people who can genuinely prove why a five-year, fixed-rate

60 January 2015 am-online.com

mortgage suited a particular customer better than a variable rate one. And they must have evidence that the customer can afford it.

The impact of the regulation is that, while people can still get mortgages, some have been adversely affected, such as the self-employed or those with interest-only mortgages. however, any mortgage interview now takes an average of three hours.

It means the customer experience has deteriorated, and it is a huge cost for the business. So some lenders are using brokers to provide the advice.

“Last year, financial institutions were fined £474m. This year, fines will exceed £1.5bn. Much of that was about customer service” The mortgage market review is six months old and already the FCA has launched its post-implementation thematic review. It will look for necessary changes, and reprimands, and wants to see if lenders understand their customers. It also wants to see a standardised advice process to avoid variability, and wants to see if lenders are playing their governance role and reacting to customer complaints and feedback to avoid detriment.

“You can hide behind the regulations or lack of regulations and you will be doomed to major fines, because if it is not explicit in the regulation, it is implicit under conduct risk that you should know whether you are doing right or wrong by your customers.”

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simon ryan, founder, social Advisors An increasing presence online means that marketing and building awareness of your brand or dealership is more necessary than ever, but also easier. Social media is a free marketing tool and should be taken advantage of.

Social Advisors’ founder Simon Ryan spoke of how his business – getting heavily regulated financial services active and successful on social media sites, such as Facebook, Twitter and LinkedIn – works.

Some 38% of social media users check their pages as soon as they wake up in the morning and over half check it before going to bed.

Ryan said: “I saw something from google saying that 30 years ago

people visited on average eight dealerships – now it’s one. This is because reviews and information about dealerships or cars is readily available to the consumer via social media or the internet. For example, I am currently deciding on a primary school for my daughter – my wife considers comments on Facebook, from other parents who have already been to those schools, as important.”

What about compliance though?

Ryan said all dealers know how important working with the FCA is, so what are the best practices when it comes to social media? FCA guidelines are all about the content, in terms of financial promotion. In April 2010, the FCA ruled that any financial promotion on social media must be treated as you would any other of your communications – if you can’t include regulation-friendly statements, then don’t post.

A successful social media account doesn’t just focus on sales patter.

People are more interested in being educated. In addition, assume everything you post online is public and permanent. “It is definitely worth thinking about who in your dealership is running your social,” Ryan concluded.

ApplYiNG For CoNsumer Credit VAlidAtioN

Need to kNow n dealers should take care in completing applications n important to decide between full permission or variation of existing louise wallis, head of business development, National Franchised dealers Association Some franchised dealers have already had landing slot deadlines to submit their application for full FCA approval for consumer credit. Key advice from nFDA head of business development Louise Wallis was to work through the form meticulously and, above all, to not miss the deadline, because dealers’ interim permission would immediately lapse and they would have to cease sales.

Dealers must check their interim permission includes all the categories they’ll need, such as category C for credit brokering and D and E if they do finance settlements, and category A if the dealer is one of the minority that lends its own money. Crucially, dealers can start putting the information together early, although they cannot submit the application until their landing slot opens. They can also view FCA videos and webinars or seek nFDA advice for guidance on making the application.

The decision dealers face is whether to apply for full permission or a variation of an existing permission. Dealers not already FCA authorised for insurance may be able to apply for limited permission, which has less regular reporting and demands. Those with FCA authorisation for insurance will apply for a variation, to add consumer credit categories to those permissions.

“Work through the form meticulously and, above all, do not miss the deadline” Associate sponsor

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nEED To KnoW ■ Dealers worry new rules mean less profit per F&i product ■ Finance suppliers say FCA’s ‘treating customers fairly’ principles mean traditional BM role needs to change By richard Yarrow ince April 1 this year, the Financial Conduct Authority (FCA) has taken responsibility for regulating the UK’s £200 billion consumer credit market. Some 50,000 businesses that offer credit – including franchised car retailers – will be expected to comply with the FCA’s Principles for Business, including ‘treating customers fairly’.

It’s likely to have a significant impact on the role of the showroom’s business manager (BM). Previously he or she has been there to optimise the dealership’s profit from F&I. But will that still be possible under the FCA code? Will a new era of complete transparency and record-keeping mean the BM is to become the customer’s new best friend? And given they have tradition-

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ally been paid a low basic salary plus commission and volume bonus, will it spark a less incentive-led system?

Already there is a split in opinion about what dealers need to do. Some in the industry believe they need to make only minor changes to ensure compliance, others say anyone who doesn’t substantially alter the way the BM does business is making a big mistake.

Making the products more transparent BMW Group Financial Services is already reviewing the role of the BM at BMW and Mini dealerships. Spencer Halil, group brands general manager, said by making products more transparent and simpler to present, the tradi-

am-online.com January 2015 63

INSIGHT The role of the business manager However, the hope for dealers is that greater satisfaction may lead to more demand.

At Black Horse, managing director Chris Sutton said: “We the past. understand how important finance income is to a dealer’s “There will be a strong position for a BM in the future, but bottom line and we believe that these changes do not necesthey will be the champions for compliance, and the sarily mean that dealer earnings will be reduced. We believe champions for customer experience,” he said. that dealers can maintain and improve their finance income Halil said there is no longer any skewing of income around by increasing penetration as a result of providing competitive one particular product, and even the training for BMs is now and transparent offers. as much focused on the potential risks as on the benefits.

“Given the new focus on fair outcomes for Debbie Hubner, sales and communicacustomers, there is now more scrutiny on tions director at Phoenix Car Company, how this reward can be earned. This is to explained that her company, which has ensure that any incentives do not potentially various Japanese and Korean franchises in result in an adverse customer outcome. As Scotland, had already started to reassess lenders we also have a responsibility to the role of the BM. ensure that we do not incentivise dealer “We have always worked to ensure behaviour that risks driving unfair customer customers are treated fairly, and have outcomes.” recognised that a positive change in our F&I Hubner said Phoenix Car Company was activity was an opportunity to enhance this. reviewing remuneration, with the focus on Above all, we want to ensure each customer process and customer experience. understands the products and services that “It’s an approach we think will be good for are available to them,” she said. all parties and will support the ‘better Hubner added that the focus had switched consumer outcome’ that the FCA is seeking,” from rates to financial insight, coupled with she said. a high-calibre buying experience. The goal, However, at Corkills, Kaye said there she said, is to create greater trust between would be no change to the BM’s payment consumer and retailer, with the hope it will terms. lead to more business in the future.

“We have no ‘cliff edges’ in our commis“We want customers to feel confident we sion structure. A BM is paid a percentage have gone all the way to explain their options Paul Kaye, based on consumer loyalty – that’s renewals in detail. Then they can make the type of Close Motor Finance and customer satisfaction – and a informed choice the regulator wants to see.” percentage on overall F&I income versus a target. That is not dependent on any particThe BM and ‘treating customers fairly’ ular product, or in any way reliant on the penetration of a In the light of recent mis-selling scandals in the banking finance or insurance product,” she said. sector, the rationale of the FCA’s emphasis on conduct and principles isn’t hard to understand. They will be about Can commission work under the FCA rules? ensuring every customer is being treated fairly and equally, Those who supply finance products to the automotive industry with a focus on them understanding their financial commitbelieve things will have to change, but not necessarily remument. neration.

As the main point of contact over F&I, the BM has a Paul Kaye, sales and marketing director of Close Motor significant role to play in ensuring compliance. They need to Finance, said commission can work provided there is a ensure the customer feels they have made an informed structured sales process, robust auditing, detailed and decision and selected a product based on appropriate guidregular training and clawbacks and/or deferred commission ance rather than simply been ‘sold to’. In short, it’s about payments. quality of process rather than outcome.

“There has to be a balance between good customer Qamar Aziz, of law firm Wragge & Co, said this is likely to outcomes and the commercials of running a business,” he include a need for the business manager to document that said. “Commission has been around since the 1950s and in they have checked the customer can afford the regulated itself doesn’t lead to poor outcomes.” product and will be able to keep up the payments in future.

‘Treating customers fairly’ is a suitably vague term, bettered No longer can an FCA-authorised dealership rely on their only by ‘ensuring better consumer outcomes’ on its lack of finance supplier’s credit checks alone. factual clarity. It certainly should mean the end of scenarios She also said the business manager should not be where a BM can sell an identical GAP policy for £495 to one identifying the potential benefits of a product without also customer and £895 to another.” giving a fair indication of relevant risks.

James Weir, business development director at Car Finance 24/7, said what the FCA rules could mean is an end The pros and cons of changing the BM’s role to the BM being offered a base rate from a finance company, Jacqui Kaye, brand manager and director at Corkills and then varying it for different customers to boost profit.

Volkswagen in Wigan, welcomes FCA regulation. She said it “The FCA will come knocking and ask why and the BM will wasn’t setting alarm bells ringing because processes were say ‘because I can’. That’s not treating customers fairly. already sufficiently robust: “At this point in time, I don’t feel “My opinion is it may lead to set rates and commissions for there is any need to change the role of the BM.” dealers. It means big changes and it might take a year or two Adrian Foster, managing director of Adroit Automotive, to happen. Does the BM’s job then become a bit easier? which supplies BMs for dealerships, is convinced change is Potentially yes.” necessary.

So could this mean an end to the traditional role of the BM “Changing the role is certainly something I intend to do. I’ll in a dealership? With finance calculators a regular part of the still supply BMs, but those will be presenting a broader range online journey most customers take before they get to the of products, will be paid on customer satisfaction, and it will showroom, could it lead to an outsourced service? Sitting a be fixed price and lower priced as well,” he said. buyer in front of a computer screen for a Skype-style converFoster said the likelihood is that the dealership, per finance sation with a BM at head office, serving multiple dealerships, case, may earn less money than it has done up to now. tional BM role of negotiating and driving up the profitability of the transaction is almost a thing of

“There has to be a balance between good customer outcomes and the commercials of running a business”

64 January 2015 am-online.com

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50,000

UK businesses, including dealerships, must comply with FCA rules if they are to continue offering consumer credit

£200bn The value of the UK’s consumer credit market

For more on how consumer credit regulations affect your business, go to am-online.com/fca

Sponsored by

1

AM ProMoTion

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3

iT’s a New Year, is iT Time for a New You?

By Jeremy Evans, managing director, Marketing Delivery

As another year closes and 2015 arrives at unabated speed, what are the lessons learned from 2014 that dealers can put in place for the New Year?

4

Mobile is where it’s at The majority of emails sent (66%*) are opened on mobile devices. Emails are opened quicker than ever on these devices and people generally don’t go back to them on a “large screen” device unless they are really important. If the email isn’t mobile responsive, the chances of a response are significantly reduced.

5

6 seems an unlikely way to ensure transparency. Giving it over entirely to a third-party finance provider could be possibility.

Mark Gow, sales director at DSG, believes it will remain a specialist in-house job, because it’s simply too much to ask a car salesman to understand all the features of an ever-expanding model range and all the various F&I options.

“You need to refer the customer to someone who understands the funding, because today it is so integral to the purchase. It’s not like it was 20 years ago when you were sold the car and then introduced to the finance man to sort out paying for it,” he said.

Disclosing commission Another expectation is the consumers will get wiser to the fact that BMs are earning commission from selling a policy, and disclosure of that to the customer could become the norm. It was introduced by the Office of Fair Trading two years ago, but as most consumers never ask, BMs rarely volunteer it.

Hubner said research had highlighted that many consumers still don’t really understand terms such as APR, and few are aware that a HP or PCP agreement offers greater consumer protection than a personal loan.

“The role of our BMs is switching to provide this extra level of detail with face-to-face guidance that’s not available online or very often in a banking environment,” she said.

“The process may take longer, but we think this is an investment in lifetime value and is enabling us to increase penetration of finance and the number of products per customer.”

What’s clear is any significant change in dealer income will mean the lost profit has to be found elsewhere. As well as impacting on vehicle prices, it could result in more pressure on the business manager.

Make it personal, make it relevant Consumers like being contacted – when it’s relevant and personalised. Keep emails targeted and customers will open them. Blast them with continual “special” offers and they won’t. Worse, you risk alienating them and reducing goodwill.

People are more Social than ever Facebook is the most used website in the UK and is the second-biggest search engine after Google. Local business pages work best to engage with local people, who use the Facebook page to check out a company before heading off to the website to begin their enquiry.

Twitter is the customer service channel you can’t ignore.

If it’s a complaint or a compliment, there is an expectation of acknowledgement, and quickly.

Customers are across all channels.

Customers flip between online and offline seamlessly. To deliver the best service, dealerships have to be delivering consistent communication in the real and virtual worlds simultaneously.

Customers may respond to an email by phone before taking to social media if they don’t get the answer they want. Get it right and they will do the same to congratulate you, so cover all the bases and don’t try to force customers down an online-only route.

Make your New Year Resolutions now and reap the benefits in 2015. * 66% of emails were opened on either a smartphone (47.2%) or tablet (18.5%) Source: Movable Ink (Q1 2014)

am-online.com January 2015 65

SHOWROOM 84

Mazda3

Mazda UK is pushing the 3 hard online in a hotly contested market segment, but there’s still progress to be made.

THE CARS DRIVING YOUR BUSINESS

86

87

Seat Ibiza

Seat is Volkswagen Group’s more youthful brand, which makes our long-term test car’s lack of digital radio quite perplexing.

Volkswagen Golf

Our long-termer gets a new set of cold-weather tyres as the VW network starts its winter health check campaign.

FIRST DRIVE AUDI TT – ON SALE JANUARY

Will the TT Mk3 be a man magnet?

Audi expects the new TT to have an increased appeal for men

Audi has conquest in mind with its tech-heavy next-gen TT

By Danielle Bagnall udi has been very focused on developing a cohesive model range in recent years. Over the past three years, the A1, A6 and A7 have all received a facelift, if not an all-new generation.

Known for its quality as a brand, Audi has surpassed expectations with this one; the hue of technology and new features is impressive.

First introduced as a concept in 1995 at the Frankfurt Motor Show, the original TT played a vital role in establishing Audi’s reputation as a force in automotive design and quality.

Bearing in mind that 1995 was about the same time as the

A

82 January 2015 am-online.com

“Most liked [the new TT] – it was received a lot better than the second generation”

likes of the Volkswagen Golf Mk3 puts into perspective just how forward-thinking Audi was and still is.

The first production model was released in 1998 and since then the model has seen just one other generation – in 2006.

The UK is the largest market in the world for the TT in terms of sales. The first-generation model sold 50,000 units in the UK and the second sold 60,000.

Audi product affairs manager for the brand Robin Davies said: “In previous years, we have averaged around 5,500 coupé sales (including TTS and TT RS) and we expect to build substantially on that figure in the first full year of the new TT, just as we did in the first full year of the Mk2.”

TT product manager Julie Salisbury told AM of the TT’s loyal customer base and the research that Audi put in when developing the new model.

“We have conducted a lot of research with the new model, including working closely with the Audi TT Owners’ Club in the UK, and most liked it – it was received a lot better than the

F O R M O R E R E V I E W S V I S I T: w w w . a m - o n l i n e . c o m / r o a d t e s t s

S P EC I F I C AT I O N Price £40,270 Engine 2.0-litre TFSI Quattro: 306bhp Performance 0-62mph 4.6 secs: top speed 155mph (electronically limited).

Transmission 6-speed S tronic Efficiency 41.5mpg: 157g/km CO2 RV 3yr/30k £15,850/50% Rivals BMW Z4, Peugeot RCZ-R

5,500

Audi UK’s typical annual sales of the TT The new TT is the first Audi to use the all-new virtual cockpit

Basic spec includes a retractable rear spoiler that deploys above 74mph

WHAT YOUR CUSTOMERS WILL BE READING ABOUT THE AUDI TT AUTO EXPRESS The new Audi TT reeks of quality – even more so than before. Its interior is Audi’s best yet – no mean feat – yet underneath, its entrylevel petrol engine, Quattro drivetrain and automatic gearbox are a sensationally efficient and powerful combination.

second generation,” she said. “The current average customer age is 45 and buyers are predominantly female, but with the third generation we expect this to switch to male due to it having a more manly look and more dominant road presence.”

The Audi badge is now situated on the bonnet as opposed to the grille, much like the R8, and the third-generation TT is definitely more angular than its predecessors.

“We already have a very healthy order bank for the new generation TT,” said Salisbury.

“In terms of sales, the loyalty rate is currently at around 40% and we expect the conquest rate to be 20-25%.”

There are three engine variants to choose from, a 227bhp 2.0-litre TFSI petrol engine, a 306bhp (37bhp more than the outgoing model) 2.0-litre TFSI petrol unit and a 181bhp 2.0-litre TDI ultra-diesel emitting 110g/km of CO2 and has a claimed mpg of 67.3.

An increase of 37mm to its wheelbase over its predecessor

aims to deliver improved handling to support the power from those engines.

New interior technology includes Audi Drive Select, which has five modes allowing adjustment to the engine, steering and transmission. It also uses Audi’s all-new virtual cockpit; the first of its models to use one driver’s screen to display everything – radio, sat nav, media. Climate controls are integrated into buttons set into the centre of the vents.

Basic spec exterior features include Xenon headlights with LED daytime-running lights and rear LED lights, singleframe six-corner radiator grille, 18-inch ’10-spoke’ alloy wheels and a retractable rear spoiler that deploys automatically at speeds above 74mph.

The S line specification adds 19-inch ‘five-arm Star’ alloy wheels, S line front and rear bumpers, side sills and rear diffuser, lower sport suspension of 10mm, black alcantara and leather upholstery with S embossing and extended aluminium-look interior.

The third-generation TT is available to order now, with deliveries expected in January. The TTS can be ordered now, with deliveries from March.

CAR MAGAZINE With 280lb-ft of torque available from 1,8005,500rpm, it’s certainly fast, but it just doesn’t feel that exciting. While we can’t knock its peerless traction, everyday usability and fantastic cabin, we wish the new TT had a little more emotion and a little less cold perfection.

WHAT CAR? The previous TT was always going to be a tough act to follow, but this new model doesn’t disappoint. It’s grippy, fun and seriously agile, and the fact it’s so much lighter than its rivals – including the Peugeot RCZ R – makes up for its relative shortage of power.

am-online.com January 2015 83

IN FEBRUARY’S ISSUE

C O N TA C T U S

PUBLISHED JANUARY 23

AM, Media House, Lynch Wood, Peterborough PE2 6EA Email: AM@bauermedia.co.uk

Face to face: Vantage Motor Group How a desire to meet the needs of staff, managers and manufacturers is driving Mark Robinson to grow his privately-owned motor retail group.

The part manufacturers are now playing in creating better optional upsell opportunities in every new car sale.

Expert advice on ways that dealers can keep their operating costs under control, such as in property management, taxation, headcount, taxation.

First drive: Hyundai i20 The previous Hyundai i20 only made sense as budget wheels, but the new model promises much greater sophistication.

ADVERTISERS’ INDEX Alphera Financial Services ......54-55

Dealer Management Services........26

Mapfre Abraxas UK................6/58/59

AMS Insurance Services ...........70-71

DSG Financial Services.....................30

Marketing Delivery ............................65

Autoclenz ..............................................66

Emac.........................................62&76-77

News International Trading ............42

Automotive Compliance ...................62

GForces ................................................25

Autoprotect...........................................44

Institute of the Motor Industry..9&15

British Car Auctions .............67/72/73

Ivendi......................................................27

Business Training & Consultancy .88

Lawdata.................................................67

Car Care Plan .........................61/74/75

Lloyds Banking Group .........20/80/16

Trader Publishing...............................29

Chandlers Worthing ..........................89

Loughborough University................85

Trusted Dealers..................................10

Chris Eastwood Automotive ...........88

Manheim Retail Services.....2/92/ 52

Zype TV..................................................39

90 January 2015 am-online.com

Editor Jeremy Bennett 01733 468261 Managing editor Tim Rose 01733 468266 Senior reporter Danielle Bagnall 01733 468343 Industry editor Tony Willard AM production Head of publishing Luke Neal 01733 468262 Production editor Finbarr O’Reilly 01733 468267 Designer Erika Small 01733 468312 Contributors Chris Lowndes, Phillip Nothard, Prof Jim Saker, Richard Yarrow AM advertising Commercial director Sarah Crown 01733 366466 Group advertisement manager Sheryl Graham 01733 366467 Project managers Leanne Patterson 01733 468332 Kerry Unwin 01733 468327 Angela Price 01733 468338 Lucy Peacock 01733 468338 Account managers Sara Donald 01733 366474 Richard Kerr 01733 366473 Kelly Crown 01733 366364 Recruitment enquiries Richard Kerr 01733 366473 AM publishing Managing director Tim Lucas 01733 468340 Office manager Vicky Meadows 01733 468319 Group managing director Rob Munro-Hall Chief executive officer Paul Keenan

The optional extra

Cost management

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Northridge Finance....................11&22

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Pentana Solutions ..............................88

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Supagard..................................79/66/78 Symco Training....................................47