Monday, July 15, 2024
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Dealers face cut in finance commission

Dealers face a drop in income from finance deals as the Financial Conduct Authority (FCA) acts to protect customers and cut the cost of credit.

The FCA is set to ban dealers from adding to the finance provider’s interest rate, the so-called rate spread, to enhance their commission.

“Very evidently, change is ahead in the world of motor finance and the industry regulator pulled no punches in the opening paragraph of its press release in which it announced plans to ban the way in which some car retailers, and other brokers in the motor finance sector, receive commission associated with the promotion of finance,” Graham Filmer of PR, marketing and training firm Rocket Performance told BDN.

The FCA’s sixty-page document identifies a clear goal to reduce the cost of credit to people sourcing their finance from dealers and brokers to the tune of £165 million each year. These savings will come from lower rates and lower dealer commissions with the burden shared between lenders and dealers/brokers.

“At a time when sales and margin are under pressure, any dilution of finance income will be unwelcome,” said Filmer. “However, the marketing potential of lower interest rates could be helpful and lower rates could help counterbalance an increase in the price of bikes, only time will tell.

“Looking at the detail of the report, it will still be possible for dealers to earn an income from finance, but their capacity to add to the interest rates, the so-called rate spread, to enhance their commission earnings in all its guises is set to be banned.”

More in the November issue of BDN.



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