Agency Models Will Drive Change in Used Car Retailing

With BMW understood to be the latest manufacturer set to embrace an agency model approach to new vehicle distribution, it is, as MotoNovo Finance’s Commercial Director Debbie McKay notes,  a development that has implications for all parts of vehicle retailing, including the used vehicle and financing sectors; “We have seen the impact of new vehicle shortages over the last two years, with franchised dealers pivoting to increase their focus upon used vehicle sales. I expect the advent of agency models will sustain this focus. The impact could be more significant than the well-publicised launch of online used car retailing.”

The over-arching principle of the agency models currently being discussed would see an online/offline model with the manufacturer (OEM) interacting with customers digitally and taking responsibility for order taking, pricing and payments. Dealers would take care of the offline test drive, part-exchange and vehicle handover elements. The aim is to take time, cost and variation, notably vehicle pricing, out of the equation.

While legal issues remain, agency models are also likely to further shrink the established franchised dealer networks for brands pursuing the model. In short, many existing dealers and dealer groups seeking to control their own destiny will continue to shift their focus towards used vehicles. It is as Debbie concludes an opportunity for the used vehicle retailing sector to re-imagine itself; “We already see the emergence of used vehicle sub-brands from established dealer groups aiming to combine franchised credibility to their used operations. While free of franchise standards, these sub-brands are designed to leverage the credibility and inherent value of a franchise type proposition. There are implications for traditional independent dealers for whom it will mean further evolution. I’m sure many will lift their game as they did through successive lockdown challenges. The opportunity to package their service and agility attributes to add a new level of trust and relevance is there. As we see in other markets, great service can command a premium.”