iVendi launches tool to tackle dealer confusion over VAP funding

iVendi has introduced a new tool designed to help motor retailers navigate growing complexity around the funding of value-added products (VAPs) such as warranties, paint protection and tyre insurance.

The functionality, which is included free within the latest update to the company’s Showroom platform, automatically applies individual lender rules for VAP funding to each finance application in real time.

According to iVendi, the development is intended to solve a longstanding challenge for dealers, many of whom currently rely on manually maintained spreadsheets to track different lender policies relating to VAPs.

“Some simply won’t fund VAPs as part of the vehicle finance, others will fund some types of VAPs but not others, while still others will have a limit on the amount of VAP funding they will include.

“To handle this, many dealers operate a spreadsheet explaining all the rules for the different lenders in their panel but keeping track of this is not easy and anyway, the rules tend to change quite often.”

The new tool automatically adjusts applications based on the selected lender’s latest VAP funding criteria while the salesperson is processing the deal online.

Tew explained: “If the application is for £10,500, consisting of a £10,000 car and £500 warranty that the chosen lender won’t fund, the platform automatically removes the £500 and places it in a shopping basket to be dealt with later, amending the application to £10,000.

“The dealer can then offer the customer a range of payment choices for the £500 warranty such as using cash or accessing buy-now-pay-later or interest free credit options through our iVendi Pay product.”

The launch comes amid increasing scrutiny of how VAPs are funded and sold within motor finance agreements, with lenders becoming more cautious about the potential regulatory implications.

According to iVendi, some lenders are concerned that including products such as warranties within long-term vehicle finance agreements could attract attention from the Financial Conduct Authority due to questions around customer outcomes and loan structures.

Tew said: “The most obvious problem is the average length of car funding is around four years while the average length of warranty is probably half that or less. Consumers end up paying for cover long after it has ended.

“Also, the funding of VAPs on motor finance agreements negatively impacts the loan-to-value position. This could lead to a decline for borderline cases or an increased customer rate from those lenders that operate risk-based pricing products.”

He added that some finance providers were reassessing their approach to VAP funding ahead of any possible regulatory intervention.

“These issues are making motor finance providers increasingly wary and some are questioning whether they can continue to operate in this way without there being an intervention from the FCA in time.

“This is why developments such as our new tool are important. VAPs remain an important source of profit for dealers and, by continuing to make them accessible against a changing lender backdrop, we are helping to preserve that revenue.”