Do Car Dealers Need to be FCA Approved?

There are approximately 4,500 UK franchised car dealerships in the United Kingdom. As the industry continues to pick itself up from the effects of the COVID-19 pandemic, it is essential to ensure car dealer compliance with FCA (Financial Conduct Authority).

If you own and operate a car dealership in the UK, it is crucial that you understand the rules around FCA approval. In this blog post, we will highlight everything you need to know about FCA regulations for car dealers, how to go about obtaining FCA approval, and more. Let’s get started.

Who Are the FCA?

As noted above, the FCA stands for the Financial Conduct Authority. This is the body that regulates the UK finance industry. Effectively, they ensure that customers in the UK are able to take out credit with reputable companies.

Otherwise, customers may:

  • Receive unfair interest rates
  • Lack protection in the event something goes wrong
  • Have unfair fees applied

In the case of car dealerships, it is necessary to be FCA-approved in order to offer finance to customers. This is true whether this is providing finance yourself or introducing them to a third-party finance company.

Do Car Dealers Need to be FCA Approved?

As a car dealer, if you wish to provide finance, the answer is yes. You must be authorised by the FCA. The reason, as mentioned, is to ensure that customers get a fair deal on finance offered to them.

So, if you do not have authorisation from the FCA yet still offer credit to customers, you face fines as well as criminal convictions. Furthermore, your car dealership’s reputation will be tarnished.

Limited Permission vs. Full Permission

When it comes to FCA approval for car dealers, there are two different types.

The first is what’s known as limited permission. This is the best option if your main business is selling cars and offering credit facilities is secondary to this. So, with limited approval, a car dealer can make up to £50,000 income a year on finance.

The second type is what’s known as a full approval. This will be necessary if introducing customers to brokers or credit lenders is your main business activity.

How to Get Approval From the FCA

In order to streamline the process of gaining approval from the FCA, we recommend that you speak to the expert team at Peak Consultants. We are here to ensure compliance with your regulatory products.

Before applying for FCA approval, it is necessary to prepare a business plan. This is presented to the FCA, which will consider your dealership’s approach to its objectives, customers, and more.

It can take up to 6 months to apply for FCA approval. This process can be sped up by partnering with our team and by providing the necessary information in a timely manner.

Finally, if you would like to learn more about automotive industry compliance with FCA, contact our team today.

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