Peter Jones

SWEEPING changes made to the car finance industry by the Australian Securities and Investments Commission (ASIC) have given the automotive sector a strong chance to capture a bigger market share and build confidence in consumers to finance their cars through a dealership, according to the head of Nissan Financial Services Australia (NFSA).

The managing director of the finance company, Peter Jones, said that the ASIC changes “from a transparency point of view and a consumer protection point of view” are a good outcome.

Mr Jones said NFSA, which had $6 billion in assets in 2017, had been working with its dealers on the ASIC changes so when they were brought into effect “it didn’t come as a complete surprise”.

“I guess the struggle point with these changes is that we haven’t had a lot of surety until relatively recently. And, even the way the legislative material has been written up, we know some things but not others,” he told GoAutoNews Premium.

“I guess every financier is taking a slightly different approach to the changes and I think over time the market will reset itself.

“I think from a transparency point of view and a consumer protection point of view it is a good outcome and I think one of the things that will come out of this is that the customer will feel a lot safer shopping at a dealership.”

Under the new legislation, finance companies such as NFSA set the interest rate, the commission and the dealers can discount that down by 200 basis points (or two percentage points) for a lower commission. The rate offered by the financier cannot be increased.

“It’s about learning to accept a much lower commission and make money from other parts of the sale process as well,” Mr Jones said.

“Dealers will have to look to make a smaller margin from each component of the sale – new-car sales, used-car sales, aftermarket, parts, service and F&I – to make the books balance.

“It will make a fundamental difference to the way the profit and loss accounts are constructed. Good dealers who make every part of their business fire, will be fine.

“The adjustments will be the difference between a good dealer and one who probably won’t make as much money as in the past.”

Mr Jones said that after talking to the franchise network, he saw that some dealers would be better off under the changes while others will have to moderate the way they sell finance.

“This is a very resilient industry and we have dealt with many changes in many facets – not just F&I – and at every change the dealers have stepped up and overcome,” he said.

“I have every confidence that will be the same again.”

Mr Jones said his company and dealers have always wanted to make the buying experience as easy as possible.

“We want people to buy cars – that’s why we exist,” he said.

“The average finance rates today are lower than some standard bank personal loan rates. So if people realise they are actually getting a really good deal, they’ll finance through a dealer.”

Nissan Australia managing director Stephen Lester said: “It all comes back into the one-stop shop and how the process connects.

“If you feel like you are going in, and you are getting a straight, honest, good-value deal and it has nothing to do with discounting, (then) it has everything to do with trust and belief that the person across the table has your best interests at heart. When you feel that, you buy,” he said.

“But when you walk into a finance office and you feel you are getting pushed in a direction that doesn’t feel right for you, for whatever reason, regardless of what you ended up doing whether you end up buying (or not), you are not going to feel satisfied with that process.”

NFSA funds the whole of the Renault-Nissan-Mitsubishi Alliance, trading under Nissan Financial Services, Infiniti Financial Services, Mitsubishi Motors Financial Services, Renault Financial Services and then has a generic brand called Skyline Car Finance.

Mr Jones said that Skyline exists “because most dealers are multi-franchises and we need to have a relationship with the whole dealership”.

“We can’t just say Nissan finance, because dealers don’t want that – they want a relationship with their financiers – and other brands don’t want their cars sold on Nissan Financial Services paperwork. So Skyline fulfils that.”

NFSA’s portfolio has assets of about $6 billion which is made up of $4 billion in retail and about $2 billion in capital loans and support for the dealers in terms of floorplans and other funding.

“In 2010 we had a portfolio of $540 million. So we’ve had a big rise and that is the result of working with the motor companies to drive the business,” Mr Jones said.

According to Mr Jones, the finance industry was as competitive as the new-car industry which had led to some very attractive deals available, including Nissan’s one per cent rate deal that first started in July 2012.

The campaign ran for only 10 days and yet Nissan sold “thousands of cars”, Mr Jones said.

“That was really the first time we had done any campaign on such a huge scale. It demonstrated the power of finance in driving vehicles sales.

“It also drew a lot of dealers to us. We don’t force them to deal with us – everyone has a choice – we now fund about 70 per cent of the network in terms of wholesale, so we earn our stripes.

“We see that when we run the one per cent campaign that our penetration goes up to more than 80 per cent some months because people are comfortable with the offer, they know what they’re getting, they know the rates and that there’s no hidden changes, and they’re happy to shop at a dealership,” he said.

“So I see, as we move forward, that situation hopefully becoming the norm. That goes back to why captive finance companies were originally set up – to facilitate the sale of motor vehicles.”

Mr Jones said the one per cent campaign was an example of one successful finance product but others were being planned.

“Certainly we are looking at what other joint ventures (Nissan Australia managing director) Stephen Lester and myself can run – that’s the power of the brand,” he said.

“Being able to make it as easy as possible for a new customer to buy and own a new Nissan – that’s what it’s all about,” he said.

By Neil Dowling