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The rise of the automotive agency sales model

Haggle-free, fixed price agency sales agreements are becoming increasingly popular in the UK new car market. According to Car Dealer Magazine’s poll of 47 car manufacturers, 18 have already or soon will be taking up the agency model. Only eight car brands ruled out switching completely and 21 remained silent.

That is a significant proportion of the industry pursuing or already using this relatively new sales model. But what is the agency model and how does it differ from a traditional franchise dealership?

Franchised vs Agency

Some of the key differences between franchise and agency agreements include:

Franchise agreement:

• • Customer haggling is possible because vehicle retail prices are set by the dealer.
  • They can then offer discounts by “giving away” some of their margin.
  • Sale contract is between dealer and customer.
  • Dealer purchases stock from the manufacturer before adding margin.
  • Dealers can pre-register cars to hit a target.
  • The dealer covers specific costs associated with the brand, such as signage.

  Agency agreement:

  • No haggling because the retail price of the vehicle is set by the manufacturer.
  • That means dealers can’t offer discounts by “giving away” the manufacturer’s margin.
  • The brand takes responsibility of the sale contract with the buyer.
  • Stock is still owned by the manufacturer.
  • Dealers can’t pre-register cars.
  • The manufacturer is responsible for other specific sales costs, such as signage.

  •  The benefits and disadvantages

    There are, of course, many reasons why the agency model is being adopted by manufacturers. That includes ensuring customers receive the same, fixed price online for their new vehicle as they do at their nearest dealership. For customers that don’t enjoy haggling with a salesperson, spending their time shopping around for a better deal on the same vehicle, or pitting dealerships against each other to get the cheapest price, this will ensure a better buying experience.

    However, on the other side of the fence, there are warnings that a lack of competition between franchised dealerships could potentially have a detrimental effect on the market by reducing customers’ choices. The National Franchised Dealers Association (NFDA) is calling for “ongoing scrutiny of different agency models and their potential impacts on affected markets, as well as a call for an industry Code of Conduct to promote fairer business practices.”

    The role of aftersales in a fixed price market

    While some manufacturers are looking to fix the price of their new vehicles through the agency sales model, the role of vehicle aftercare remains as important as ever. Customers still want to protect their vehicles and their investment with a high-quality warranty, cosmetic, tyre and alloy insurance, for example.

    With most new cars bought with some kind of finance agreement, many customers also prefer subscription style payments for their vehicle aftercare, such as with a service plan or MOT Test Cover. So, as with franchised dealers, agency retailers would still benefit by providing their customers with high-quality vehicle aftercare products, such as those offered by Car Care Plan.

    Not only will they lead to a greater customer experience, improved satisfaction rates and a boost in retention, but also additional routes to market and revenue when the vehicle cost is fixed across the agency network.

    To learn more about Car Care Plan’s industry leading warranty and Motor related add-on products, contact us today.