In July 2020, the Financial Conduct Authority (FCA) published their final rules in a policy statement which referenced risk-based pricing as one of the potential commission structures that dealers could consider switching to in light of the ban on discretionary models which comes into force from January 28th 2021. The encouraging news for dealers and customers is that risk-based pricing is already making a significant, positive impact to dealers who have already adopted the MotoRate risk-based pricing solution introduced by MotoNovo Finance in June and now in use by over 2,000 dealers.
This is the finding of a major piece of research commissioned by MotoNovo assessing consumer attitudes to buying and financing a used car.
Reflecting on the findings, MotoNovo CEO Mark Standish notes; “We had already seen the positive impact of the MotoRate pricing model on dealers’ finance penetration and heard the anecdotal feedback from dealers on customers’ views on the MotoRate experience. We wanted to gain an independent, objective insight on the impact of the greater transparency in the finance process afforded by the risk-based pricing approach; the results were both staggering and very pleasing. We hope this provides dealers with added confidence that change can be a very positive outcome.”
As well as the significant increase in trust with the dealer identified in the research, MotoRate also enhanced other attributes; 83% of customers described the dealers as ‘helpful’ and 90% describe as ‘friendly’. This feedback outperformed the view of both dealer groups and independent dealers not using MotoRate significantly. Non-MotoRate dealers’ ‘helpful’ rating was in the 42-49% range, while the ‘friendly’ attribute ranked 36- 48% range. In both cases, the upper ranking was for independent dealers.
Mark closes by noting; “Overall, as hoped, the MotoRate finance process and the fact that dealers can happily explain to customers that they have no input on the interest rate, which purely reflects customers’ credit status is changing the trust dynamic. Dealers are seen as more transparent and clearer. Not only is this enabling dealers to increase their finance activity; many are reporting that the ‘halo-effect’ of enhanced trust is helping to close more sales and increase the sale of added value products. Historic barriers are being broken down to everyone’s benefit.”