Car buyers’ lack of finance understanding presents ‘high potential for mis-selling’
Car buyers’ lack of awareness about car dealers’ obligations when selling finance products suggests a “high potential for mis-selling of F&I products”, according to Alphera Financial Services.
The finance provider’s newly-published Consumer Attitudes to Car Finance report results from a survey of 1,035 car buyers and found that 71% of car dealership customers would rather discuss the colour of their new car’s paint than their finance option.
And it encouraged car retailers to make car finance as easy to understand ane one of the more ‘exciting’ elements of a car purchase to avoid potential non-complaince with Financial Conduct Authority regulations.
Alphera said that 64% of consumers are unaware that salespeople are required to discuss their financial needs and requirements when purchasing a vehicle on finance.
Gerry Kouris, Alphera Financial Services’s marketing manager, said: “It’s imperative that we challenge ourselves to do better, helping dealers to match the right product to the right person every time.
“For many dealers, this will involve business model diversity – looking at new ways to innovate and secure outcomes that are positive for them and, importantly, their customers.
“As the survey data in this report shows, there’s a deficit between dealers’ obligations and customers’ awareness of their rights.”
Alphera said that its data suggested a surprisingly low level of consumer awareness of dealer obligations when selling finance and insurance products, suggesting a high potential for mis-selling of F&I products.
However, it added that looking at the results in a more positive light presented an opportunity for motor retailers to build greater levels of trust between themselves and their customers.
Spencer Halil, director of Alphera Financial Services, said that the deficit between a dealer’s obligations and customers’ awareness of their rights meant that “sales staff must clearly explain every aspect of a finance product, and properly assess the customers’ needs”.
He added: “If dealers can address this gap and offer total transparency, they can empower customers to make an informed decision, giving them confidence that a finance product is truly appropriate for them.
“In the long term this approach will foster greater customer loyalty and more sustainable income for dealers.”
There is a clear disparity between the areas of service that consumers wish to discuss in the showroom – and those that they might rate a retailer’s service on – and their understanding of the need for a detailed discussion about their finance needs.
Alphera’s research found that 82% of UK car buyers believe the manners of sales staff are of the same or greater importance compared to having a detailed discussion about their finance options, with 46% suggesting that being offered refreshments by dealer staff was a key issue.
Test drives were rated of the same or greater importance by 88% of respondents.
When it came discussing finance in greater depth, customers were almost wholly concerned with the size of an initial deposit contribution and monthly payments, while just 15% suggested that the impact on their credit rating would be a major concern.
Findings from the consumer survey have underlined the need to improve standards across the industry and enhance transparency in the sale of car finance, Alphera said, however.
The finance specialist recently established a partnership with the Institute of the Motor Industry (IMI) to promote the uptake of a new education and accreditation scheme for F&I sales specialists.
Four-out-of-five respondents (79%) said they would be more likely to transact a car purchase with a dealership salesperson who holds formal, industry-approved accreditation governing the sale of F&I products, it said.
The first assessments under Alphera and the IMI’s new accreditation course took place in July 2018, with a 100% pass rate.
Kouris said: “This accreditation pathway, robustly assessed and backed by the IMI, will give the customer the confidence they need to trust our industry in everything we do.”