Reduce subsidy costs and give customers more choice with FCA authorisation
Posted on in Business News , Cycles News
FCA authorisation allows you to offer more than just 0% finance over 12 months, giving your customers even more choice, whilst minimising the cost of finance to your business.
Allowing your customers to buy on finance and spread the cost is a great way to grow your sales, and whilst offering 0% finance is a simple way to get started, offering a range of finance options can provide additional benefits for both you and your customers. In order to do this, you will need to apply for FCA authorisation.
Why do I need FCA authorisation?
Offer more than just 0% finance
Getting FCA authorisation allows you to offer more than just 0% finance. 4.9%, 9.9% and 15.9% APR can all be used alongside 0% finance when you become FCA authorised, but knowing when to use each APR option can be key to making the most of finance.
Use 0% to clear old stock or to attract customers to higher margin products.
Vary interest rates to suit the product, the customer and you; an APR of 15.9% (payable by the customer) is better than the rate charged by many credit cards and is completely free of charge to the retailer, protecting your margin.
Customer Example:
| Interest rate |
15.9% over 24 months |
0% over 12 months |
| Bike cost |
£1200 | £1200 |
| Deposit |
£120 | £120 |
| Customer's monthly payment |
£52.29 | £90 |
| Cost to retailer | £0 | £89.10 |
Flexible payment terms
Giving customers the option to spread the cost over a longer period of time will reduce their monthly payments. Payment terms for the customer can range from 6 to 48 months with FCA authorisation. Without FCA authorisation the maximum term is 12 months.
Customer's nowadays are used to paying for things monthly - from phone contracts to car insurance. So, when given the option, many customers would prefer to pay over 48 months on a slightly higher APR than 12 months on 0% APR as their monthly payment will be significantly less.
Reduced subsidies
The higher the APR, the lower your subsidy cost - which means you protect your margins, allowing you to offer finance even on already discounted items.
When you offer just 0% finance over 6, 10 or 12 months you either have to accept that your margins will be affected by the subsidy cost, or restrict your finance offering on only those products with an already bigger margin. By offering the full range of finance options you can introduce interest bearing options on products with a lower margin, such as already discounted stock.
Buy Now Pay later
As well as a range of APRs and payment terms, FCA authorisation allows you to access the brand new Buy Now Pay Later option, giving your customer even more choice!
The opportunity to defer payment is a great way to make larger purchases more attractive, particularly at a time of year when customers may not otherwise be able to afford what they really want. With this option, customers can 'buy now pay later' with up to 6 months payment-free, after which they pay back in interest free monthly repayments, just like they would with standard retail finance.
It pays for itself
It costs just £100 to apply for FCA authorisation with an annual fee of c.£145.
However, considering that your subsidy is massively reduced when you introduce an APR (in fact at 15.9% APR over 24 months it's completely FREE to the retailer), the authorisation pays for itself.
Get FCA authorised now
Apply for FCA authorisation today and you could be fully authorised within weeks. The ACT can provide support throughout to ensure the application process is as simple as possible.
Contact the ACT on 01273 427 700 or email info@theact.org.uk to get started.