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Serkan Obuz, Automotive Warranty Director at EMaC, discusses how the Financial Conduct Authority’s (FCA) Consumer Duty regulations will impact GAP sales and how dealers can take steps to mitigate this by offering alternative products with demonstrably positive consumer outcomes.
How will the FCA’s Consumer Duty regulations impact the way F&I is sold by dealers from 31 July?
The new FCA Consumer Duty regulations are all about good consumer outcomes and being able to measure this across all F&I activities.
The countdown to implementation on 31 July has been well signposted giving dealers and providers time to assess how they are affected and introduce robust processes to ensure they are compliant and can demonstrate they put customer outcomes ahead of everything else, including profit.
This has seen dealers reviewing their F&I products, processes and pricing structures to determine whether they are completely confident they can evidence they are meeting the Consumer Duty outcomes, ahead of implementation.
Are there any F&I products that could be less favourable for dealers to sell when the regulations come into force?
Yes, we believe dealers are evaluating the long-term feasibility of GAP insurance sales.
Under the new regulations the strong margins traditionally enjoyed by dealers selling GAP may need to be reduced to demonstrate to the FCA that they are competitively priced against GAP products being offered online outside of the dealer sales channel. Under the new rules they will need to prove their pricing is fair.
Additionally, dealers will need to ask themselves whether they can provide data-based evidence to demonstrate the positive outcomes of the GAP policies they sell.
Some of the dealer groups we speak to have actually stopped selling GAP because they do not feel the extra labour involved in meeting all the new requirements and guidelines will be worth the smaller margins.
What alternatives are EMaC offering dealers planning a future without GAP sales?
Consumer Duty casts a wide net, so any FCA regulated business needs to factor in good outcomes for consumers, whether the products they sell are insurance based or not.
With that in mind EMaC offers pick and mix style Maintenance Plans covering:
- Warranty (with mechanical and electrical cover, including roadside assistance)
- Servicing
- Tyres
- Alloy Wheels
- Cosmetic
- MOTs
Consumers can select the items they want covered and fund their plans through a pay as you go monthly subscription or pay in full upfront. The cost of scheduled inspections, repairs and maintenance is included in the plans, providing a cost-effective, flexible and convenient solution to help consumers maintain the reliability and visual appearance of their vehicle.
Dealer sales commissions are flexible, they can be paid upfront, monthly or a mix of both.
Our Maintenance Plans require an initial inspection by the dealer and scheduled checks thereafter. This provides consumers with peace of mind, knowing their vehicle is being checked on a regular basis.
While dealers benefit from regular touchpoints by building an ongoing aftersales relationship with these consumers, something they were unable to do with GAP.
EMaC. All taken care of.
Speak to us today to see how partnering with EMaC can benefit your dealership.
Website: emac.co.uk | Email: dealersupport@emac.co.uk | Tel: 0330 099 6826