Motor finance will soon start to resemble mortgage sector as FCA takes effect

Motor finance will start to more and more resemble the mortgage sector during 2015 as FCA regulation starts to take hold, says iVendi.

Increasingly, as with the mortgage sector, rates will be set by the lender rather than at the point of sale, and there more product choice will be given to the customer.

Crucially, commissions are likely to be dramatically reduced on each transaction thanks to the FCA’s accent on what it describes as “workload,” says iVendi CEO James Tew.

He said: “We foresee, in a relatively short space of time, a situation where car buyers will compare motor finance products online in exactly the same way as mortgages, either by themselves or sitting in the dealership with a sales person.

“Like buying a mortgage, there will be a high degree of transparency and consumers will be easily able to see the pros and cons of different kinds of product from different providers.

“This is, we believe, the most likely outcome of the FCA’s impact on the motor finance sector, and we believe it is one that will lead to higher levels of consumer trust and therefore eventually sales for dealers and motor finance companies.”

James said that the FCA’s concept of “workload” where financial reward should be based on how much work was needed to complete a deal by a sales person meant that the whole commission situation needed to be reviewed.

“We are in a situation where a sales person can sometimes receive a four figure commission for a deal that might last 10-15 minutes to complete.

“In no way does this fit with the ethos of the FCA and commissions of this type will have to be completely reformed and undoubtedly made much lower.

“Again, we foresee a situation like the mortgage market where the commission received is much more closely matched to the time taken to find the right finance product for the customer.”