POS finance must adopt ‘third way’

Fundamental rethinking of point-of-sale motor finance is needed so that dealers can reclaim their lost independence, says Peter Cooke, University of Buckingham professor of automotive management, in a comprehensive study published this month.

Prof Cooke goes further in his review of the reasons for the decline in POS finance, brought about mainly by the growth and aggressive promotion of alternative methods of funding.

In the report, commissioned by Black Horse Finance, he says: “There is also a real risk that finance may increasingly come under the direct control of the car manufacturers’ finance houses, with their objective of selling their own cars, and of banks and building societies, where the agenda is lending finance rather than tailoring a loan to satisfy a would-be car buyer’s exact requirements.”

This is why Prof Cooke calls for the retail motor industry to have a total review of the way it sells POS finance and the structure of the teams selling it.

He thinks it is possible for POS to become a preferred first choice of finance method once more, rather than it being offered as a “reactive product of last resort”.

One of Prof Cooke’s radical conclusions is that finance rates should be focused on ability of the lender to repay the loan, rather than the age of the car.

He reckons the historic ‘one size fits all’ approach is fundamentally flawed.

Prof Cooke writes: “The future success of the rejuvenated finance process now rests firmly but equally with dealers, their sales force and the POS finance sector.

“In the same way that POS finance providers have been through a fund- amental rethink, there is a need for dealers, and dealer sales consultants, to adopt a new and positive mindset.”

He wants POS put “firmly alongside alternatives in terms of rates and customers’ needs”. The company car, he says, has become a financial services product in the way it is financed.

“The private car is moving the same way and POS finance can be a catalyst in that change, creating a ‘third way’ for finance with the real possibility of being the ‘first choice’,” he says.

Historically, POS finance has had “an unjustifiably poor image” and has been seen by many buyers as uncompetitive. This, he says, must change.