European automotive

Navigating the auto finance industry in uncertain and challenging times


Mike Dennett and Spencer Halil discussed the blurring of boundaries between traditional fleet and retail auto finance markets, driven by customer demand, increasing digitalisation and post-pandemic changes.

BMW Group Financial Services and Alphabet have reorganised bringing both organisations under the single leadership of Mike Dennett as chief executive officer. Addressing an audience of over 200 delegates at the latest Solifi sponsored webcast, Dennett explained their priority was on providing a “holistic premium customer experience”. Results from BMW Group’s powerful customer forums and customer listening paths across fleet and retail revealed many common elements – both positive and negative – across both business and consumer auto finance customers. As Halil points out, “there were some common threads running through both of the organisations”, with Dennett noting that the joint customer focus of the BMW Group Financial Services and Alphabet businesses facilitated their coming together.

“The holistic premium customer experience was one of the goals in bringing the businesses closer together.”


Better together

BMW Group first started to look at merging their retail and fleet businesses with a pilot project called EVOLVE, designed to support the company to become stronger together while adapting to the changing business environment and fiscal environment. “By working together, we can get the best out of our people, our systems, and our processes to support our customers more accurately,” reveals Dennett.

Halil feels that bringing the two sectors together provides “the best of both worlds, where you get that variety and flexibility along with that simplicity, convenience and digitalisation. And the opportunities in this sector will come to those organisations that manage that combination effectively.”

“This coming together of leasing and retail is principally about providing flexibility, choice and value to a broader range of customers.”


Dennett believes that the merging of fleet and retail sectors in the auto finance industry is a “hybrid and a blend and it is shifting”.

“Fleet was to some degree reducing, the corporate benefits were reducing and going more towards salary sacrifice and back to either individual ownership or usership. But with BEVs and the potential advantages of BIK at the moment, then perhaps it is swinging back the other way,” notes Dennett. “I think it’s pretty dynamic and I think it will remain pretty dynamic, partially driven by fiscal policy and fiscal benefit in the corporate sector and if you look at the individuals, salary sacrifice and those coming out of corporate schemes, they might be looking at something different to someone who has owned their car for years.”

Connected cars – opportunities

Dennett sees car data as a tool to enable the auto finance company to provide a better customer experience and tailor services that are appropriate to the customer needs, by providing the information needed to understand market trends. This presents a potentially profitable opportunity, although lenders need to be mindful over the regulation and data protection requirements, and the question of who owns that data.

“Data is the power behind the connected car which can be used to understand market trends and behaviour.”


Halil feels that sharing data with fleet customers will support them in areas such as looking at their carbon footprint, increasing engagement with the management of their fleets. The focus of the connected car, according to Halil, should be on sharing the data back with customers to enrich their experience, not just gathering data for the sake of it: “Customers will only pay for it if they see it adds value.”

Headwinds facing the industry

There are many headwinds facing the industry today including the cost-of-living crisis, rising inflation and interest rates and supply chain delays, which Dennett likened to a cooking pot with ingredients that don’t go together!

Dennett warns: “It is important that we get on top of that as an industry both in terms of underwriting policy and making sure we are identifying customer vulnerabilities but also supporting customers throughout. It will be a real challenge.”

Halil sees regular communication and contact with customers, whether retail or fleet, as key in helping them understand that the auto finance company is there to support them facing today’s challenges and navigating that uncertainty.

This comes against a background of rising interest rates which are creating a lot of volatility and margin pressures in the auto finance industry which will inevitably be passed on to the customer, and when less discounts are available to customers on the forecourt, due to car supply issues, customers at the end of a contract will experience a large cost increase when they change their car for a similar model.

The price differential between ICE and BEV remains, although the gap is narrowing. And over time there will be some transaction pressure on the price of BEVs, but Mike Dennett believes that there will have to be an adjustment in the price gap going forward, even though he does not see the market slowing towards BEVs.


While Dennett welcomes the recent publication of the new Consumer Duty, he cautions that the key to the far-reaching principle will be in the interpretation of price and value. BMW Group have been working with industry associations including the BVRLA, FLA and NFDA to discuss and agree an interpretation.

Delivering price and value to the customer will have a far-reaching impact on the value chain, especially the OEMs and captives in that chain. Dennett stresses that within the BMW Group, they “work hand-in-hand together” with the OEM so that they are all fully compliant, transparent and “there is a common understanding”.

Highlighting the PACE (Premium Alphabet Customer Experience) initiative at Alphabet, Halil explains that there was already a focus on the customer who is always at the forefront of their strategy and thinking. While they fully embrace the requirements of the FCA’s new Consumer Duty rules, Halil believes that they have “already travelled much of that journey”, and says the new principle “amplifies what was already within the regulation and makes it clear that you have to fully embrace the spirit of what is intended”.

“Consumer Duty amplifies what was already within the regulation… you have to embrace the spirit of what is intended.”


Dennett sees Consumer Duty as a clarification, taking things one step on from treating customers fairly (TCF). BMW Group are looking at the differences between TCF rules and Consumer Duty rules and evaluating their current processes, taking it as an opportunity to review what already stands. Halil highlights the “enhancements and evolutions” where BMW will be further refining the way in which they create and develop their products and launch them to the marketplace, making sure that products are being back-tested, monitored and supervised at every aspect of the product’s life and how it interacts with the customers.

Now that the Consumer Duty regulation has been published, Mike Dennett believes commission disclosure will again be a big point for discussion with further clarity and guidance needed from the FCA.

Recruitment of talent

As CEO of both BMW Group Financial Services and Alphabet, Mike Dennett passionately believes that “bringing through the younger generations is our future.”

The various intern programmes, apprenticeships and global leadership development schemes across the BMW businesses, both in the production and commercial businesses, are “providing opportunities for people to develop and excel,” according to Dennett. “Every day is an opportunity for us all to learn, and it is important to learn from everybody, and get those perspectives and diversity in to our workplace and into the decisions we are making.”

“Bringing through the younger generations is our future.”


Apprenticeships offer a “dual hybrid development” of being in the workplace and learning in tandem and applying the theory to the workplace, giving a “much broader better development”. The current “war on talent” in the business world is a driver to bring in talent to the auto finance industry.

Hybrid working – known as “blended working” at BMW Group – is actively encouraged, with BMW Group already implementing this style of working pre-pandemic. Dennett sees blended working as a really powerful option for the younger generation who are “not just looking for financial reward, they are looking for flexibility and looking for a great place to work”. Dennett also notes that the next generation of talent is “looking to have responsibility, looking to be empowered, looking at a diverse workforce where we can learn from the diversity of our surroundings”.

Analysis from David Betteley AFC Auto content leader

With BMW Financial Services and Alphabet coming together to unite their offerings to the customer, along with Lex Autolease and Black Horse being brought under a single combined leadership structure by Lloyds Banking Group, the merging of fleet and retail businesses is definitely a growing trend in the auto finance landscape.

Additionally, the changing attitude of customers and the journey from ownership to usership to subscription to Car as a Service is bringing together both the fleet and retail parts of the auto finance industry where businesses can utilise their knowledge and experience and help the customer – whether corporate or consumer – get the right product and service for their needs.

However, some 62% of the webcast delegates believe that there is still a future for purely retail and/or fleet providers.

As BMW Financial Services’ Mike Dennett highlighted, whether the auto finance industry will stay as separate fleet or retail divisions or as a blended-hybrid business, the focus will simply be on ‘the customer’ who will always be at the forefront of the industry. This is the same in every business, with the customer being the final decision maker.

With the publication of the new Consumer Duty principle and rules, the focus has shifted to delivering “good outcomes for customers”. Alphabet and BMW Financial Services will be fully embracing the new guidance, keeping the customer at the heart of the business and remaining focused on ensuring “good outcomes” for the customer through customer forums, communication, and in the way their products are created, developed and launched in the marketplace.

And while Dennett sees the current uncertain economic situation as a “real challenge” for the industry, both he and Halil feel that the customer and their vulnerabilities must be identified and they must be supported throughout these difficult times.