Agency model can benefit dealers

THE agency sales model adopted by OEMs including Honda and Mercedes-Benz should not be dismissed by dealers as it presents opportunities and benefits that potentially outweigh traditional dealership models, said Allied Credit’s chief partnerships officer, Barnaby Turner.

Mr Turner said that while some dealers were concerned about the agency system, there were possible advantages.

He said that under an agency, dealers don’t have to pay for finance on the stock because it will be owned by the OEM, even when it’s on the dealer’s lot. 

“The delivery fee received from the OEM for a vehicle handover might be more generous than the profit margin they would have retained from selling discounted stock in some circumstances – especially if the OEM creates a tiered fee model which rewards dealers who deliver higher targets,” he said.

But he cautioned that dealers still needed to “have their fingers in the business” and be aware of how customers react to the new model.

Barnaby Turner

He said that some customers will love the new arrangements because they may not want to  haggle with a salesman and some won’t even want a test drive. 

Others will want to have a relationship with dealers, particularly if they or their families are long-standing customers.

“One of the concerns about the agency model is the dealer loses the customer,” he said.

“I don’t necessarily agree with that. Maybe the ownership is technically changed but the relationship can still be built by the dealer.

“Modern cars, in particular EVs, are quite complex and a well-trained salesperson can add considerable value to the customer experience by providing information and confidence in the process.”

Under the agency model, it is the OEM who “sells” the vehicle to the customer. The dealer, as the agent, becomes responsible for the test drive, the face-to-face activity, and the delivery. 

Dealers have no discretion on price, which is fixed by the OEM, creating a similar model to the direct-to-customer models used by some EV manufacturers such as Tesla.

“In the current environment, where stock is low and demand high, there isn’t much discounting, but it is yet to be seen how the agency model will perform in a more competitive market and if it will be adopted more widely,” Mr Turner said.

Where dealers can’t discount, as in the current environment, they compete on service so the customer relationship becomes paramount. 

“By maintaining and nurturing that relationship, dealers will still buy and sell used cars to customers and still service the vehicles they’ve sold and sell spare parts,” he said.

Mr Turner said that there are other tools available to maintain customer and dealer relationships, including value-add products such as a guaranteed future value.

“By putting a guaranteed future value in there, the loan term can be shortened and bring it more into line with the lifespan that the customer would like,” Mr Turner said.

He said some customers may be in equity and ready to take on a new vehicle and a new loan, again providing an additional service to the customer that benefits both the client and the dealer.

Mr Turner said the important rule was to maintain and foster the long-standing relationship between dealers and OEMs while keeping the customer’s needs in focus.

By Neil Dowling

Exit mobile version