Time to review the options

“There is scope for many dealers to get better value from their used inventory stocking. We are encouraging dealers to take the time to assess their options and to explore ways to reduce costs and mitigate any potential FCA compliance risks. With some fresh thinking many franchised dealers could benefit,” observes NextGear Capital Finance Director, Michael Kelleher.

While dealers know that inventory funding is a significant operational cost, research by ASE suggests that attempts to reduce stocking days have largely seen limited improvement. In spite of this, NextGear Capital believes that adopting a wider holistic view to stock funding could see improvements.

“A wider Just In Time (JIT) approach to purchasing stock is now very feasible. Moving 10 – 15% of stock to JIT by buying digitally has the potential to make real in-roads into stocking days. This is one of the real driving force behind our new StockMaster platform and the partnerships we have in place with the majority of NAMA members right across the UK and with a host of other remarketing organisations,” notes Kelleher.

The call for dealers to review their stock funding options is not just limited to reducing stocking days. The availability of funding monies has improved, providing a new level of choice that dealers should consider. Perhaps more importantly, regulation of consumer credit has the potential to impact any reciprocal retail finance to wholesale finance arrangements that may be in place.

The FCA regulatory requirements to disclose commission to customers upon request requires all financial benefits to be included within the ‘commission’ definition. This could include any reciprocal stocking benefits. Going further, economic benefits arising from retail finance also have to be included within dealers periodic FCA GABRIEL reporting. If a dealer has a reciprocal stock funding/retail credit arrangement that results in reduced stocking costs linked to retail support, this would be considered an economic benefit. Calculating such benefits would be complex!

In closing Kelleher reflects; “We believe that franchised and independent dealers should assess the opportunities to improve their used inventory funding approaches. Compliance, technology and consumer buying habits are all driving changes in the showroom; used stock funding needs to be assessed to see how it could benefit from positive change as well.”