Consider multiple funding lines to get through quiet March
The managing director of NextGear Capital is urging dealers who aren’t already using flexible funding to strongly consider doing so, now that the roadmap out of lockdown has been announced.
Car showrooms will remain closed during the crucial March plate change month and won’t open until 12th April at the earliest, following the UK Government’s recent announcement. Demand is expected to be high once restrictions are lifted and showrooms re-open. This is likely to affect dealer stock levels moving forward.
Car dealers can retain full stock levels thanks to a variety of funding options. The majority will rely on either captive or non-captive finance. Captive finance can either be funding which is tied to a stock source or funding with certain restrictions such as needing to sell an agreed amount of consumer finance to qualify for a credit limit or a certain rate. non-captive finance provides dealers with more freedom, as the funding is sourced from an independent company.
Liam Quegan, Managing Director of NextGear Capital commented: "Dealers that rely on funding for their wholesale vehicle purchases, are highly encouraged to be flexible. The route out of lockdown presents both opportunities and challenges to car dealers, and if April is the month where dealers see high demand, retaining stock levels up to and beyond April will be of upmost importance to them."
Dealers that only use captive finance may rely on consumer finance packages reoccurring at normal levels. During times where sales numbers are low and there’s the potential to miss sales targets, there are intrinsic risks of being hit by a lower credit limit, or by penalties which can include increased rates.
Mr Quegan added, "Dealers should use the quiet month of March to strongly consider having multiple funding lines in place for the rest of the year, keeping cash flowing and restricting the effect of unforeseen consumer trends that impact investment in additional stock.
"Being part of Cox Automotive allows NextGear Capital to view the entire automotive ecosystem, and we can offer dealers practical advice on navigating through this short-term market uncertainty."