Graham Wheeler on Motor Finance
Sixty-second interview with Graham Wheeler, motor finance guru and ex CEO of VW Bank, on the development of products and challenge against opportunity in the motor finance sector.
Many of the Challenger banks have moved into Motor Finance; how successful have they been?
Motor Finance is an enormous segment of financial services with nearly £100 billion in lending per year, so it’s no wonder that many of the emerging players have seen some opportunity there. It’s very competitive though and is highly dominated by the Manufacturer Finance Companies, especially for new cars. There are still huge opportunities in the used car segment, via digital sellers, and this is perfect for the Challengers to grow their asset bases. However, to be both successful and profitable, they really need to have a better understanding of that market.
Why do the OEM Captive Finance Houses dominate and what can Independents do to compete?
The Captives have access to the tactical marketing funds that OEMs (Original Equipment Manufacturers) use to sell their cars, and use this to integrate their offer with the car, and the dealers. Therefore their risk and their funding costs are minimal, and they are very efficient in terms of their overheads. They also are experts in selling and managing Personal Contract Purchases (PCP), now the natural finance product to sell cars. This all works because they completely understand each element of the customer journey and customer needs with regard to in-life products.
The Independents have a choice – to learn the same skills and compete head to head, on price, product and service – or to develop niche products for niche segments. They are much smarter in terms of their digital approach and are more flexible in terms of digital partnerships.
The biggest untapped opportunity is the range of non-asset based products that are sold in this market, like warranties, insurances and service plans. These products are highly marketable and profitable. They can be sold in such volumes that can increase overall return on equity by 50%. Independents so far have missed this opportunity.
You recently worked with Shawbrook Bank to develop their Motor Finance proposition. How did that develop?
Working with a Challenger Bank is high paced and digitally demanding – so I had to adapt very quickly to that culture. They wanted to enter the used car motor finance market, but to do it solely digitally and using their existing expertise.
They had a blank sheet of paper and very little knowledge of motor finance – but they had developed a relationship with the RAC Financial Services, a very strong Brand in the car market.
Some of the outcomes I achieved at Shawbrook were:
- developed a new PCP style of personal loan
- designed and implemented a new digital system for quotations, underwriting and digital on-boarding
- built an interface into the RAC Used Car website where there are over 600,000 cars for sale
- prepared the team around risk management, pricing, underwriting, collections and vehicle data management
- built interfaces into the Industry data providers like CAP
What was your biggest success there, and what could have gone better?
The innovative product we designed – Flexiloan - became so attractive to the market, that many other partners like Clearscore, Confused and other specialist used car sales companies were lined up to join the same initiative. So I was very proud of that!
As far as what could have gone better, I think that what Shawbrook have is very special. They have a great product, a very versatile and transparent customer journey, with great partners, well recognised in the UK. I believe they have further opportunity to develop standard motor finance lending products that are much more established and augment their product range with the other non-lending products I mentioned earlier. They can be a big player in Auto Finance.
What do you hope to do next?
Whilst my first interim assignment was fulfilling and successful, it used a small part of my knowledge and expertise. In my previous life, I was a CEO of a Specialist Automotive Bank, Fleet Management Business, Consumer Lending Business, Insurance Brokerage and Aftersales & Warranty business. Being “Pigeon-holed” as just a motor finance expert doesn’t really describe me accurately and I hope my next big project can utilise more of what I can offer.