How to become a car finance dealer
What you need to do know to become a car finance dealership
Car finance dealers in the UK
At First Response Finance, with over 20 years’ experience of offering finance to sub-prime customers, we understand the unique challenges faced by used car dealers in the ever-evolving world of the motor trade.
Despite working with thousands of car finance dealers annually, we know that there are many more dealerships nationwide who don’t currently offer finance options to their customers. This guide aims to give you an in-depth overview of the benefits of offering car finance to your customers, and the benefits to you on becoming a car finance dealer.
Car finance for car dealers: The key to selling more cars
Understanding the basics
According to statistics from Statista, 79.4% of all UK households own at least one car, and with UK households keeping their cars for an average of 3.5 years, not all customers can afford to buy their car outright every time they want or need to change it.
Growth in finance for used car dealers
The used car dealer finance market has seen huge increases in recent years, so if your dealership is not currently offering finance to your customers then you could be missing out on a considerable number of sales by not offering finance as an option to your customers.
FCA Authorisation
The Office of Fair Trading used to be responsible for overseeing and issuing finance licenses to dealers, enabling them to sell cars on finance. In April of 2014 , this responsibility was handed over to the Financial Conduct Authority (FCA), and instead of being licensed, dealerships are now ‘authorised’ by the FCA to offer finance.
How do I get setup to offer used car dealer finance?
You can check the FCA website for more information on the process of applying for authorisation, their process, and what you need to do to be able to offer finance as a used car finance dealership.
How do car dealers finance their stock?
Dealers often use a combination of methods to finance their stock , including bank loans, manufacturer financing, and partnerships with specialised finance companies.
Many car finance dealers finance the stock they buy through stocking loans. A stocking loan allows a dealer to purchase stock for their pitch, and then sell that stock on behalf of the finance company.
When a car that has been bought via a stocking loan is sold, the amount that is owed to the stocking loan provider is settled by the car finance dealer. Typically, car finance dealerships will then use the remaining profit from that sale, to invest in other stock. There are risks to this model, but there are also plenty of benefits too.
First Response Finance does not currently offer a stocking loan facility. However, if this is something you think we should investigate further, please don’t hesitate to get in touch with us and let us know your thoughts.
How does car dealer finance work?
If you want to be a car dealer who can offer finance to your customers, the first thing you need to do is decide which car finance companies/ lenders you are going to partner with, so you can become a car finance dealer.
Once you have a finance company on board, you can send them your customer’s applications for finance, and they will advise you if they can approve the finance for your customer or not. If approved, the finance company will usually ask you to send some paperwork over to support your customer’s finance application, and then pay you for the car once the customer has signed the finance agreement and provided any additional paperwork that is needed to complete their finance application.
The benefits of offering car finance for dealers
Having the ability to offer finance gives your customers more options to pay for the car you have for sale. As many customers can’t afford to pay for a new car outright, offering them car finance means they can spread the cost of the car over several years, and can make a wider range of your stock more accessible and affordable to your customers.
Offering car finance as a dealer at point of sale can also make the buying process much easier for your customers too, as you can save customers time from having to search for finance themselves.
Ultimately, offering finance allows your car finance dealership to offer more buying options to customers, sell more stock, appeal to a wider base of customers, and improve your dealerships bottom line.
Car financing for dealers: A tailored approach
All of your customers will have different credit histories; some will have no problem getting finance from well-known high-street lenders, whereas others may have issues on their credit file and struggle to get approved for finance, but still need a car. This is where companies like First Response Finance can help, as we offer sub-prime finance options for car finance dealers to offer their customers.
We have a flexible lending criteria, with no vehicle age limit, and we can finance, and we can finance petrol cars up to 120,000 miles and diesel up to 160,000 miles. We understand the importance of getting an approval for finance on the car the customer wants to buy from the car finance dealers we work with. Our underwriters manually review each application on its own merits, which gives us the ability and flexibility to approve complex deals that other lender’s may not even consider.
Get set up to work with First Response Finance
If you want to work with one of the best sub-prime finance companies in the UK, First Response Finance is here for you. Our flexible criteria, award-winning service, and consistent recognition from the industry, we are the go-to sub-prime finance company in the motor trade that you can trust.
Partner with us and experience the difference of working with the best subprime finance lenders, dedicated to helping you and your dealership get more deals over the line. If you don’t currently work with First Response Finance and would like to discuss how we can help you and your sub-prime customers, click the button below fill out the form, and Brad from our team will be in touch to discuss how we can help you sell more cars on finance.
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It is crucial for all finance companies, brokers, and dealers in the motor trade to work together to deliver good outcomes for all retail customers.