Customer-facing businesses are on the frontline of both economic and regulatory change but are automotive retail dealerships tackling the challenges and finding new opportunities, asks Richard Coates.
The retail automotive sector faces myriad challenges, from FCA reviews and supplier issues to vehicle availability. The increasing demand for electric vehicles and the global chip shortage have led to a rise in customer complaints about unavailability and delays. Across the sector there has been a significant spike in dealerships receiving consumer repair complaints, and recall queries, resulting in vehicle rejections or requests for price reductions
Until the industry adapts and innovates to meet changing market conditions, consumer expectations will remain high. Dealerships must continue to meet their customers’ needs. With new legislation on the horizon, maintaining customer trust and efficiently handling complaints is more crucial than ever to protect your business.
Regulatory challenges
In October 2024, the Court of Appeal handed down a judgment that ruled in favour of the consumers in relation to their complaints about commission payments from lenders that were not adequately disclosed when they took out finance agreements to purchase vehicles. Following that judgment, and the press from consumer champions such as Martin Lewis, we anticipate that consumer complaints will increase in the coming months. This is likely to be one of the largest challenges to lenders and therefore dealers over the coming months – and if market predictions are correct, this could be the next PPI scandal. It is critically important that certain steps are taken now to reduce any further potential liability, whilst we wait to see whether the Supreme Court takes the case for further review. The Supreme Court hearing is listed in early April 2025.
Dealership Obligations
The Digital Markets Competition and Consumers Act 2024 (DMCCA) starts to come into force through 2025. The digital market and competition aspects of the DMCCA have just come into force on 1 January 2025, the consumer aspects are expected to come into force from April 2025, designed to protect consumers from unfair business practices by prohibiting misleading and aggressive commercial conduct. Further, the Act grants the Competition and Markets Authority (CMA) the authority to levy fines without requiring a court process, which speeds up the resolution of consumer disputes and discourages future illegal activities.
It is crucial for dealerships to proactively ensure that advertised prices clearly reflect all consumer costs and to implement reasonable and proportionate measures to prevent fake reviews. If they do have to process a consumer complaint, they must handle it properly and consistently to avoid enforcement action from the CMA and Court claims from consumers.
Dealerships will be legally obligated to comply with the DMCCA and associated legislation. Non-compliance can result in severe consequences, including:
• Adjudication by the Motor Ombudsman and its binding decisions.
• Court action by consumers.
• Fines from the CMA.
- £300,000 or up to 10% of a business’s annual global turnover (whichever is higher) for breaching consumer laws;
- £150,000 or up to 5% of a business’s annual global turnover (whichever is higher) for failure to comply with a direction;
- £30,000 or up to 1% of a business’s global turnover (whichever is higher) for non-compliance with information requests or providing materially false or misleading information to the CMA in the course of an investigation
• Harm to the dealership’s reputation and business
Top 5 Reasons Why Dealerships Should Prioritise Complaint Handling
Enhance Customer Satisfaction and Loyalty Effective complaint handling is crucial for car dealerships as it transforms negative experiences into positive ones, thereby fostering customer loyalty. When customers feel their concerns are addressed promptly and fairly, they are more likely to return and recommend the dealership to others. This not only enhances customer satisfaction but also drives repeat business, which is essential for long-term success. Maintaining high standards in complaint resolution can help dealerships comply with consumer protection laws, reducing the risk of legal disputes, and enhancing the overall reputation of the business.
Compliance with Consumer Rights Obligations Adhering to consumer rights laws, such as the Consumer Rights Act 2015, is essential for dealerships to ensure customers’ legal rights are respected. Dealerships that are faced with complaints should avoid legal disputes by being aware of their obligations to customers and issuing the relevant remediation, whether that be full refunds and/or compensation (if relevant), in compliance with the Act. Proper handling of complaints not only helps maintain compliance with consumer rights laws but also avoids potential fines and legal disputes, thereby safeguarding the dealership’s reputation and financial stability.
Improve Reputation and Brand Image Building and maintaining a strong reputation is vital for dealerships. Demonstrating a commitment to resolving issues effectively builds trust and enhances the dealership’s reputation. For instance, a dealership that is willing to implement a robust complaint handling process and address issues proactively will reduce the number of follow up complaints. This approach not only leads to an increase in positive reviews and customer referrals but could also attract new business. Happy customers are more likely to leave positive reviews, further boosting the dealership’s brand image and market presence.
Identify and Address Systemic Issues Effective complaint handling allows car dealerships to identify and address systemic issues. By conducting root cause analysis, dealerships can gain valuable insights into recurring problems. For example, if a dealership discovered that a large proportion of their complaints were related to the quality of pre-owned vehicles, it would be prudent to introduce stricter quality checks and enhanced staff training. Fixing the issues at their source significantly reduces the number of complaints and improves overall customer satisfaction. You can utilise feedback for continuous improvement to refine products, services and processes leading to better performance and a stronger market position.
Boost Employee Morale and Efficiency Effective complaint handling can significantly boost employee morale and operational efficiency. Dealerships that train and empower their staff to handle complaints not only increase their confidence and job satisfaction but also see quicker resolutions. For instance, dealerships that have a robust training system can usually allow employees to resolve common complaints without managerial approval. This empowerment leads to higher employee morale and more efficient operations.
Likewise, dealerships that have a streamlined complaint handling processes in place usually see reductions in the time and resource spent on resolving customer issues, resulting in happier customers and a more productive workforce.
Richard Coates leads Freeths’ commercial dispute resolution team in Birmingham.