Will finance without dealers be the future?

Following a recent review by the Financial Conduct Authority (FCA), it is starting to appear that a dealer-free financing structure might be on its way.

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Instead of dealer involvement, with its high commission charges and interest, motor finance of the future may be undertaken with technology taking the place of dealers to help customers navigate the lending market.

FCA review

Following analysis from 20 motor finance providers and its own mystery shopping experiences, the FCA has expressed concern regarding commission levels charged by brokers when this is linked to the interest rate charged to customers.

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According to an FCA spokesperson, higher broker commission can equate to customers paying over £1,100 in interest charges over a four-year term based on a typical motor finance agreement of £10,000.

Too much discretion

The FCA states that this is due to brokers having too much discretion on how to charge customers. The organisation also has concerns that lenders are not doing enough to monitor brokers to ensure customers are less at risk.

In addition, the FCA warns that customers are not being given sufficient information regarding their motor finance options at the early stages of purchasing. This would put many firms in breach of the requirements set out by the FCA to ensure they are as transparent and upfront with customers as possible.

There is a query over whether lenders may assume that a broker is compliant with FCA regulations if they are FCA authorised, as the FCA monitors compliance in its accredited firms; however, it seems that not all firms are abiding by the rules and customers are losing outs.


One way to combat this risk to customers may be to utilise advances in technology to offer clients a more automated process when it comes to their motor finance. Using brokers such as https://www.quotemetoday.co.uk/motor-trade-insurance that offer specialist products such as motor trade insurance alongside everyday motor insurance can enable customers to take more control over their financial options and more clearly view a breakdown of the charges.

In addition to offering clients more control, self-serving finance options online or in the showroom will increase the availability of the audit trail required by the lenders. With no dealer involvement, there is less risk of paperwork going missing and the customer is in charge.