Both leading Australian car dealer groups, Automotive Holdings Group (AHG) and AP Eagers, are upbeat despite a ban on flex commissions.
AHG notes the release by the Australian Securities and Investments Commission (ASIC) of its draft determination on flex commissions is largely in line with what the car sales company had anticipated.
It believes the proposed reforms will not have a material impact on finance commission earnings.
AHG managing director John McConnell says the draft allows dealers to retain incentives aligned to volume of sales combined with an element of downward flexibility in rate negotiations with buyers.
“AHG will consider the draft and discuss with its lenders to understand how they intend to set their pricing and adjust their processes and how dealerships integrate those adjustments,” says McConnell.
AP Eagers CEO: ‘We will adopt a new F&I model for car finance’
Australia’s other leading car sales company, AP Eagers has welcomed ASIC’s announcement.
AP Eagers, an ASX-listed public company, arranged car loans totalling more than $850 million in 2016.
“We appreciate that ASIC has consulted extensively with industry, including with us and the Australian Automotive Dealer Association (AADA), and has incorporated key industry recommendations into its decision,” says AP Eagers chief executive Martin Ward.
“ASIC’s proposal will establish a level playing field for consumers by prohibiting all car dealerships and finance brokers from increasing interest rates payable by customers above a base rate set by financiers and participating in any benefits from the increase.
“We believe ASIC’s decision will provide surety for financiers to continue offering market competitive rates, while allowing dealers to be reasonably compensated for managing customer outcomes at the point of sale.”
Importantly, the decision allows dealers the ability to make reasonable adjustments to consumer rates at the point of sale in order, Ward says.
ASIC has allowed for an 18-month transition period, during which AP Eagers says it will work with its various financiers to implement any necessary operational changes.
ASIC’s proposed changes are not anticipated to have any material impact on AP Eagers’ current levels of finance income.
Join the conversation