But in a twist on that model, Allied Credit is now providing car finance back-office infrastructure not just to dealer groups, but to groups of dealers as part of a joint venture with Dealer Motor Finance Australia Holdings. 

In a further twist to the model of a traditional financier, the operating company Dealer Motor Finance Australia (DMFA) has arrangements that will allow dealers to fund non-auto business and commercial loans within their communities.

The brainchild of the former chief and the founder of Capital Finance Motor Australia, Steve Dyson, the initiative would allow individual dealers to have shareholdings in the same finance company for which they are selling retail finance paper.

Launched in March this year with a capital raising of $8 million, DMFA is offering those dealers who missed out on the first round of investment the chance to now get on board.

The dealer shareholders own 50 per cent of the business and Allied Credit owns 50 per cent of the venture. The new raising is seeking up to $12 million.

Steve Dyson

Mr Dyson, who is managing director of DMFA, told GoAutoNews Premium that the latest offer was made at the request of dealers who missed out on the initial offer and was more about recruiting dealers to expand the number of retailers selling DMFA finance than any need to top up the capital funding of the business.

Mr Dyson said that while any dealer can sign up to sell DMFA retail paper,  it was preferred that dealers selling DMFA finance should also be shareholders because it gave them a vested interest in the success of the enterprise. It additionally made sure that DMFA management was giving top priority to, and was wholly focused on, its dealer customers.

By teaming up with the back-office support from Allied Credit, DFMA avoided the cost duplication that would occur if it was to create its own admin services.

He said the upside for dealers is that not only do they get competitive commissions (because the back-end scale brought to the table by Allied Credit provides a lower cost structure) but dealer shareholders will ultimately receive dividends paid out on the profits their day-to-day funding activities generate for DMFA.

The CEO of Allied Credit, Jon Moodie, told GoAutoNews Premium that “bringing together multiple dealers to own their own finance company and aggregate finance volumes is a concept we have been exploring at Allied for quite some time. So, when Steve and his team proposed DMFA to us, we understood the benefits of what they were trying to do and immediately recognised this was the best way to achieve success.”

Jon Moodie

DMFA offers dealers:

• Retail finance with highly competitive pricing and attractive commissions
• Wholesale floorplan finance 
• Choices; a separately branded panel of 45 different lenders to fund the more difficult credits to drive up dealer finance penetration rates
• Choices Commercial for non-auto lending: effectively setting up a regulator-compliant brokerage operation within a dealership for the local community. 

Mr Dyson said DFMA was a bringing together of motor dealers who “will enjoy the benefits of a finance company that is focused purely on their needs”. 

“The beauty is that, as shareholders, the dealers then supply DMFA with retail paper. And the way DMFA grows is through retail paper. 

“We don’t write direct business. We don’t look to do a deal with a direct client who is buying a new car from a dealership; our customers are our dealers,” he said.

Mr Dyson said that Choices is a brand name for an outsourced model for finding finance for the more difficult deals. It involves the aggregation of 45 financiers who will take higher risks for higher financial rewards and is “unique to this business”.

“Typically, once a finance company declines a deal they are not interested in what happens next. So, DMFA has put together this aggregator model to let the dealer find a financier that is prepared to fund the sale of the asset. 

“Clearly the rates change and the dealers have to resell the pricing to the customer, but it means it’s not a failed sale; it means those cars at the end of the month that were sold, but not delivered, will diminish because we’ll find a home for them.

“Let’s say one of the factory financiers has declined a deal. They don’t say: ‘Oh, by the way, we’ve declined it, but can we help you find it somewhere else?’ And obviously the dealer gets paid a commission and the dealer also delivers the car. Well, that’s unique to traditional lenders.

“What this model also does is deliver outsourced compliance to the dealer so the dealer doesn’t have to worry about holding their own ACL licence.”

Mr Dyson said that a key goal for DMFA was to increase dealer finance penetration and that dealers going forward had the potential to double penetration rates from a current average of around 30 per cent to 60 per cent and beyond.

“The dealership is an obvious place to buy vehicle finance. Whilst commissions are regulated finance income per contact is clearly reduced. But doubling finance penetration will result in a significant additional income, not by contract, but by efforts of the business managers. Instead of selling one, they can now achieve two or three.” 

Referring to Choices Commercial he said: “Choices Commercial is another brand name for the commercial side which allows the dealer to market to their own database, to their local community or even do finance deals for people buying cars from some other dealer. Again, this is fully covered under the regulations through the outsourced model.

“It gives the business manager the opportunity to make more money for the dealership and the dealership doesn’t have to worry about the burden of compliance because it’s outsourced. 

“No other finance company does that and it has been well received.”

Mr Dyson said that DMFA dealers were able to set up as non-automotive lenders to individuals and businesses in their local communities using the Choices Commercial platform.

“We don’t carry the debt. We just facilitate the approvals or the credit through this panel of lenders. So if it is a commercial deal, we have half a dozen lenders who specifically focus on funding property, commercial property and consumer property. 

“But we don’t carry that because that’s not our core product. What we will do is facilitate an approval and the dealer will gain a commission and it will potentially fulfil a need for a customer beyond an auto loan.

“They can write business in exactly the same way as the finance broker or the broker down the street can do in the community.”

Mr Dyson said that business managers should be encouraged “to go out and talk to the community and look for commercial loans at no extra cost to the dealer because they already have them on salary”. 

He said that the dealer can organise loans on “anything that is fundable. We have access to finances that will fund it”. 

“I don’t know how much it would cost to set up as a broker in a town but a dealer can do it for nothing. There’s no material cost. They already have the people and the premises. 

“Once we get this message across, I think the business managers can make a lot more money. Choices gives them the tools to be able to talk to the community and fund whatever is needed in that community that is financeable,” Mr Dyson said.

Footnote: A total of 26 investors include two non-executive directors, Tony Ireland and Peter Terry, both industry icons representing the motor trade with a third retailer representative to be announced soon.

The majority of the shareholders are current or previous dealer principals. They include Boy Bradstreet, Tony Bonanno, Frank Bamford, Bruce MacFarlane, current dealers Greg Ambrose Pearce, Andrew Bennett, David Hillier, Nik Page, Geoff King, Adam Kaplan, Errol Stewart and Paul Wakeling.

By John Mellor