Is this the end of dealerships?
Discussion
https://www.telegraph.co.uk/business/2024/10/30/mi...
^^
Basically, Lloyds have lost a court case which means dealers can't receive a commission on finance packages without telling customers...
^^
Basically, Lloyds have lost a court case which means dealers can't receive a commission on finance packages without telling customers...
Edited by dxg on Wednesday 30th October 15:09
dxg said:
https://www.telegraph.co.uk/business/2024/10/30/mi...
^^
Basically, Lloyds have lost a court case which means dealers can't receive a commission on finance packages without telling customers...
I might be missing something here, but surely everyone knows that someone selling a finance package is getting some form of commission from that.^^
Basically, Lloyds have lost a court case which means dealers can't receive a commission on finance packages without telling customers...
Edited by dxg on Wednesday 30th October 15:09
All that seems to be at issue is it is now required that they disclose that figure.
I have read the article and it isn't completely clear to me.
I think the issue is the bonus the lender pays the dealer which seems to be different to the bonus/commission/fee paid to the sales person when selling a car on tick which I believe is currently disclosed.
I would guess some lenders don't want this info public so are either preparing for the damaging impact of disclosure or exiting the market to avoid disclosure.
The risk to the car market seems to be reduced credit availability impacting sales in a market kept afloat on credit.
Could be completely wrong and reading this is 15 seconds of your life you won't get back.
I think the issue is the bonus the lender pays the dealer which seems to be different to the bonus/commission/fee paid to the sales person when selling a car on tick which I believe is currently disclosed.
I would guess some lenders don't want this info public so are either preparing for the damaging impact of disclosure or exiting the market to avoid disclosure.
The risk to the car market seems to be reduced credit availability impacting sales in a market kept afloat on credit.
Could be completely wrong and reading this is 15 seconds of your life you won't get back.
This issue isn't going anywhere:
https://www.telegraph.co.uk/money/consumer-affairs...
It's looking like the next PPI.
https://www.telegraph.co.uk/money/consumer-affairs...
It's looking like the next PPI.
No ideas for a name said:
I might be missing something here, but surely everyone knows that someone selling a finance package is getting some form of commission from that.
All that seems to be at issue is it is now required that they disclose that figure.
The Court of Appeal has said that the car dealer is also acting as an agent for the consumer and should have their interests at heart and should disclose commission.All that seems to be at issue is it is now required that they disclose that figure.
In some cases comission was hidden and in others it was partially revealed.
The Court of Appeal casewill probably be appealed to the Surpeme Court. My reading of it is that the COA prob want it appealed to the SC as they were bound by some existing cases which made it quote confusing - the SC can basically reinterpret it all to make it all clearer.
What is the point of Dealers anyway.
Invariably useless, rude, lacking in knowledge.
It would be better to simply have the halo model on display in a small room with a bouncer. Let anyone interested have a fiddle (the car, not the guard).
Then spec and order online.
Nothing but bulls
t ever comes out of their mouths.
Invariably useless, rude, lacking in knowledge.
It would be better to simply have the halo model on display in a small room with a bouncer. Let anyone interested have a fiddle (the car, not the guard).
Then spec and order online.
Nothing but bulls
t ever comes out of their mouths.This happened in financial services years ago. In the long run it tends to separate the wheat from the chaff. Small dealerships with wither away leaving the big players to clean up, albeit with smaller margins.
It’ll go something like this:
- Punter haggles a £20k car down to £19k. Dealer oos and ah’s, sucks teeth, wrings hands and defers to the “manager”
- But the punter reads that the dealer will also get £3k commission on the finance.
The punter won’t walk away but the sales person will see as a potential hurdle.
If financial services is the template, the future doesn’t look good for small dealers and the customer.
It’ll go something like this:
- Punter haggles a £20k car down to £19k. Dealer oos and ah’s, sucks teeth, wrings hands and defers to the “manager”
- But the punter reads that the dealer will also get £3k commission on the finance.
The punter won’t walk away but the sales person will see as a potential hurdle.
If financial services is the template, the future doesn’t look good for small dealers and the customer.
It is far from the end for dealerships, but the model will simply change.
The 'undisclosed commission' ruling means that dealers need to be transparent about how much commission they are making from finance, very much in the same way my mortgage broker is forced to tell me how much he is getting for organising my mortgage and my pension advisor is for my pension. Nothing new to see here for those working in professional services.
The inevitable 'New PPI scandal' compensation that will have to be paid out to those previous finance customers who were not informed of these 'enhanced commissions' will all be absorbed into future finance rates. Martin Lewis might be rattling his sabre that he's won a great deal for people who have been "ripped off" but many of these were blissfully unaware of the commission amounts and I dare say happy at the time with their monthly payments. Notwithstanding that, if they have suffered a loss (albeit one they were unaware of) they are entitled to compo and let's face it, who is going to turn down free money from a car manufacturer? As I say, that compensation payout loss will be recouped in the long-term by finance rates that are above where they would otherwise be.
Back to the plot: most volume car manufacturers are going down the Tesla-style "agency model". The price is the price, determined centrally by the manufacturer. There will be zero negotiation on the price of the new car by the dealer. The dealer is effectively a test drive agent, a purchase handover centre and an aftersales centre.
The dealer can enhance their margin on the deal by controlling the trade-in value, or offering the most competitive finance they can get you, with all commission disclosed, of course.
The elephant in the room here is that dealers will therefore want to offer as little as possible for trade-ins, so they can maximise their margin on resale - this is the only realistic wiggle room they will have. Ergo this has a knock-on effect to residual values which then impacts monthly lease/PCP variables. In ten years time most people will be trading one EV for another, it is effectively like upgrading your Smartphone. Battery life will become the key determinant of trade-in value, something it is difficult to argue with.
It's a bit of a race to the bottom and I don't think it will end particularly well. Large dealer groups will probably be OK out of it, but I suspect many smaller more traditional dealerships will go to the wall or be absorbed into dealer groups.
The 'undisclosed commission' ruling means that dealers need to be transparent about how much commission they are making from finance, very much in the same way my mortgage broker is forced to tell me how much he is getting for organising my mortgage and my pension advisor is for my pension. Nothing new to see here for those working in professional services.
The inevitable 'New PPI scandal' compensation that will have to be paid out to those previous finance customers who were not informed of these 'enhanced commissions' will all be absorbed into future finance rates. Martin Lewis might be rattling his sabre that he's won a great deal for people who have been "ripped off" but many of these were blissfully unaware of the commission amounts and I dare say happy at the time with their monthly payments. Notwithstanding that, if they have suffered a loss (albeit one they were unaware of) they are entitled to compo and let's face it, who is going to turn down free money from a car manufacturer? As I say, that compensation payout loss will be recouped in the long-term by finance rates that are above where they would otherwise be.
Back to the plot: most volume car manufacturers are going down the Tesla-style "agency model". The price is the price, determined centrally by the manufacturer. There will be zero negotiation on the price of the new car by the dealer. The dealer is effectively a test drive agent, a purchase handover centre and an aftersales centre.
The dealer can enhance their margin on the deal by controlling the trade-in value, or offering the most competitive finance they can get you, with all commission disclosed, of course.
The elephant in the room here is that dealers will therefore want to offer as little as possible for trade-ins, so they can maximise their margin on resale - this is the only realistic wiggle room they will have. Ergo this has a knock-on effect to residual values which then impacts monthly lease/PCP variables. In ten years time most people will be trading one EV for another, it is effectively like upgrading your Smartphone. Battery life will become the key determinant of trade-in value, something it is difficult to argue with.
It's a bit of a race to the bottom and I don't think it will end particularly well. Large dealer groups will probably be OK out of it, but I suspect many smaller more traditional dealerships will go to the wall or be absorbed into dealer groups.
Edited by Shooter McGavin on Wednesday 13th November 15:31
I think dealerships will survive, if you're backed by a manufacturer that owns the cars, the finance co and buys the part-ex, you've many different ways to make your money, it just shifts.
Finance Brokers though, the ones I know aren't happy about this at all. Who would be? Why would anyone who makes money from retail or trade want to have to disclose their margin, or face years later having to give it all back?
Finance Brokers though, the ones I know aren't happy about this at all. Who would be? Why would anyone who makes money from retail or trade want to have to disclose their margin, or face years later having to give it all back?
EmailAddress said:
What is the point of Dealers anyway.
Invariably useless, rude, lacking in knowledge.
It would be better to simply have the halo model on display in a small room with a bouncer. Let anyone interested have a fiddle (the car, not the guard).
Then spec and order online.
Nothing but bullst ever comes out of their mouths.
Lots of brands tried this, direct to consumer, fixed prices etc. I think Mercedes still do. Not only cars, but concept stores also used to be popular with all sorts of consumer brands.Invariably useless, rude, lacking in knowledge.
It would be better to simply have the halo model on display in a small room with a bouncer. Let anyone interested have a fiddle (the car, not the guard).
Then spec and order online.
Nothing but bulls
t ever comes out of their mouths.Didn't work, especially with Cars, everyone assumed the fixed price was just the starting point, plus you do need someone to handle servicing, warranty claims, test drives all that stuff.
P-Jay said:
Lots of brands tried this, direct to consumer, fixed prices etc. I think Mercedes still do. Not only cars, but concept stores also used to be popular with all sorts of consumer brands.
Didn't work, especially with Cars, everyone assumed the fixed price was just the starting point, plus you do need someone to handle servicing, warranty claims, test drives all that stuff.
I would've thought the next generation of car buyer would be utterly appalled at the traditional car buying experience. Didn't work, especially with Cars, everyone assumed the fixed price was just the starting point, plus you do need someone to handle servicing, warranty claims, test drives all that stuff.
I've only bought one new modern car in recent ish times from a franchised dealer around scrappage time and it made my skin crawl. I will go a long way to avoid that experience again.
So far the attempts to modernise it like Cazoo have been miserable failures, but some day it'll be the norm.
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