V12 Motor Finance is a new stock, sale and repair funding operation from Secure Trust Bank. Why is the time right for this?
We wouldn't be doing it without our partnership with Aston Barclay, certainly not the stock-funding part (V12 lets dealers find and buy stock from Aston Barclay, recondition it and fund it through an app), because we wouldn't want to go into the market as just another funder without a significant USP.
We could have launched a prime finance business and just been another one in the queue of reps at dealers' doors, in a rate war. This way, we are genuinely blending auction services, dealer funding and end-consumer finance for vehicles and repairs in a way that no other funder is doing. We're first to market.
With the Moneyway brand, initially as sub-prime and then near-prime consumer finance, Secure Trust Bank has focused on helping mostly independents and small franchised dealers sell cars. How is this better?
If they are not selling cars, we can't fund and finance them. The guy with 20 cars on a forecourt now struggles to compete in this market. If we can give funding to get 40 on his forecourt, he can start to compete, and get him to a 60-car dealer, he's at the right scale point. We're going to help dealers scale - I think there will be fewer dealers in the future, but they will be bigger, so there will be more value in the relationships. That's why having all these services in one place leverages value.
Do you expect V12 to be a first-string lender to an independent?
Yes. we are not just a first-string lender, our sales team is skilled in presenting Aston Barclay's products and services, and in presenting Service Assist, which will help the dealer with workshop capacity.
Critically, we can also do the near-prime funding business. A lot of those small dealers probably only have one or two cases a month that fall below prime - they put them on to a broker or they don't bother with them. With us, they can place the customer in a rate band and sell the car. One proposal, one decision - that's quite rare. So we can fund 20 out of 20 sales, we will do it seamlessly and digitally, and when you are low on stock you pop online, find it, fund it, get reconditioning and images, and it can go on sale.
Do you think franchised dealers may improve too?
A lot of franchised dealers don't have adequate used car stock funding. My experience with Nextgear Capital was that
franchised dealers were very ignorant about the benefits of having more used cars on their forecourts. They genuinely lacked confidence in finding the right cars for their business, and that's where working with Aston Barclay will help us - because Neil's team can help them think about what is the right stock for their business.
Some of the bigger groups have put significant investment into non-branded used car operations. That's how they are securing their future, because the maths of 1.5-2.5% new car margins and manufacturers asking for £3 million showrooms don't work very well. Their incomes are in used cars and service and repair. Our proposition deals with all those needs. Lots of customers won't consider repairing their car in franchised dealerships because they perceive it as expensive. Imagine if that conversation becomes about 0% APR finance of your repair bills.
Will Moneyway still exist as a brand?
We will 'sunset' the Moneyway brand over the next 12 months. As we launch new platforms, we'll be taking Moneyway away as an origination brand - obviously there's still a legacy (loans) book.
What does the recent FCA motor finance review mean for your business?
We were very well prepared - we were a compliant lender before that announcement even came out. We have flat commissions and we have not operated difference in charges (DiC) for quite a while now. If the FCA does force full disclosure of commissions, we are well placed to do that. Our platforms are ready.
Article published in AMonline