VOLKSWAGEN Financial Services is taking on the direct lenders head-to-head with the launch of a new, ultra-competitive PCP product called New Solutions, which will be available across the complete Volkswagen Group network.
Dealers in the Audi, Volkswagen, SEAT and SkodaAuto networks will be able to offer the new product – which includes a multitude of new financial benefits – to customers from mid-June onwards.
- Smaller minimum deposits
- More flexible contract periods
- Lower annual mileages
- Higher guaranteed minimum future value (GMFV)
- Smaller repayments
- More competitive and flexible interest rates
Feedback from dealers told VWFS that the new PCP product, to compete against direct lenders whose share of the finance market has been growing, had to be totally flexible to meet the needs of retail customers.
As a result, the previous product was re-built from the ground up, bringing in new features such as smaller deposits, longer contract periods and more flexible payments periods and intervals.
Sales and marketing director David Maloney said that the New Solutions PCP product was a clear indication of the way in which the company was intending to go in the future – working closely with its retailers to develop new products for the market.
‘It has not been a case of revamping an old product – this is a brand new proposition with a keyword of flexibility attached – flexibility in the size of the deposit, for example, in the contract period, in the payment intervals, in the contract mileage – and in the amount of commission that retailers can earn.
‘If there is a key word for New Solutions it is ‘flexibility’ and we believe we have created a product which will allow Volkswagen Group retailers to cater more readily for the exact needs of almost every customer.
‘Feedback from our discussions with our retailers told us that they felt they needed greater flexibility with any new PCP product – in areas such as the deposit, the contract period, the contract intervals, the guaranteed future minimum value (GMFV), and the contract mileage.
‘As a result of that feedback, we have structured the new product to provide as much flexibility as possible, taking into account all our retailers’ concerns.’
The key word in the development of the New Solutions product has been flexibility. For example, the minimum deposit is now reduced to just one month’s rental, and the maximum 30%, from 10% and 50% respectively.
This will provide Volkswagen Group dealers with far more flexibility around the minimum deposit, removing that barrier to purchase that undoubtedly existed for some customers. And it will also prevent those customers who believed they would get their deposits back at the end of the contract period, from putting in such high amounts of their equity into what is basically a depreciating asset.
The contract period has now been increased from a maximum of 36 months to 42 months, and reduced from a minimum of 24 months to 18 months – again to give retail customers as flexible a choice as possible.
Nor do they have to select contract periods in blocks of 12 months. Now they can tailor the contract period to meet their monthly budget by adding an additional month or two, or three, to come up with a period that keeps them within their monthly budget figure.
The annual mileage figure for New Solutions is also reduced from 60,000 to 25,000 miles a year, to more accurately reflect the driving habits of the retail market, and the contract mileage ceiling has been set at 80,000 miles compared to 120,000 under the old scheme.
While this is appropriate for the needs of the retail market, VWFS is aware that small business users may have greater mobility needs and are in the process of creating a new product – Cash 4 Car – which will cater for these.
Also with flexibility for retail customers in mind, VWFS has increased the level of the GMFV to 90% of the predicted residual value of the car, from the previous 80%, to help keep monthly payments down.
At the end of the contract period, retail customers face the same three choices – paying the GMFV and retaining the vehicle; part exchanging it against a new car; or handing it back and paying a fair wear and tear payment to cover the visible deterioration in the car over the contract period.
VWFS will provide support to dealers using New Solutions in two main areas – through marketing, using point of sale material, which has been developed in conjunction with the Business Development Group; and through training courses carried out by the 38 Business Development Managers.
The POS material will involve in-showroom colonnade displays, mirror hangers and new point of sale literature, while in terms of training, each BDM will carry out a one-day training session for business managers, brand managers and sales personnel, beginning in the second week of June.
Focus of the training sessions will be the Q2 initiative, aimed at helping retailers identify the key ‘Q’s’ of the sales process – quest, qualification, question, quench, quash and quote – tried and tested techniques that should be more than just a handy reminder of the best ways to sell finance.
Support for New Solutions will not just focus around launch, but will also cover the key period from August to October with tactical campaigns to take advantage of the period when the new September registration plate will be a key factor in the new car market.
And there will be a winter campaign over the November and December period – immediately prior to Christmas - to keep the momentum going.
The previous Solutions PCP will be phased out over the two months following the launch, with no new Old Solutions business written after July, although it will remain on dealers’ systems for longer to honour existing contracts.Published 21 June 2002