Fuel/Interview: Liam Quegan on stock funding during the pandemic

In the third episode of the Cox Automotive Fuel/talk pandemic, hosted by Customer Insight and Strategy Director James Davis, we hear from Managing Director of NextGear Capital Liam Quegan. In the six years since launching in 2014, NextGear Capital, a Cox Automotive business, has funded more than £2billion of vehicles, offering Stocking Plans to independent and franchised used vehicle dealers selling cars and LCVs.

As the pair sat down in mid-September to record this episode, the topic of dealer response to COVID-19 was obviously top of mind. Like many organisations when lockdown hit in March, Quegan admits NextGear Capital was concerned about what the impact might be. He outlines: “Certainly, going into the situation, we didn’t know what we were facing. We were very worried our dealer partners were going to encounter a struggle like they’d never confronted before.”

Reflecting on the previous six months, Quegan comments how proud he is of the dealer community and the support which NextGear Capital was able to provide. “Right through that challenging time, we did everything we could to support our dealers. My biggest observation overall is how well so many of them dealt with it.” While the market shut down in late March, many dealers started to get back up and running from late May, with Quegan noting how important it was for the automotive retail supply chain to come together to get stock moving as quickly as possible.

For NextGear Capital, there were a few specific initiatives which Quegan believes made a real difference. Working closely with dealer partners, the NextGear Capital team determined that allowing retailers to keep units on their plan longer than usual, removing funding restrictions and extending timeframes would make a significant impact. Indeed, comments Quegan, it was “the sensible thing”; “if dealers couldn’t sell those units, we couldn’t expect them to pay us back straightaway.”

Dealers also benefited from reduced interest rates and lowered or waived fees. “It caused us some financial pain,” comments Quegan, “but we wanted to make sure our dealers were supported and could carry on funding vehicles. It was really important we could support dealers to prepare for their return to market.” Best practice was shared across the Cox Automotive network, with the NextGear businesses in the US and Canada regularly liaising with the teams in the UK and Ireland.

Quegan is not a stranger to managing lending businesses during a recession, commenting that, in many ways, the industry is in a much better position than perhaps initially expected. Demand has been strong, for both cars and LCVs, while there are several additional drivers influencing consumer demand – surplus cash from holidays which were not taken, a reticence to travel on public transport, and support schemes for certain business sectors. However, he cautions, further restrictions on movement and the economic squeeze when government support schemes come to an end mean there are still challenges ahead.

“We need to be very alive to a position that is, now, about as good as I could have anticipated. But we are heading into more challenging months,” he says. Indeed, Quegan comments that the first quarter of 2021 is likely to test many businesses. “It is a great thing that many of our dealer partners have been able to benefit from government support and loans to weather the storm,” he suggests, adding that organisations like Cox Automotive have comparatively deep pockets and can support dealers through both the good and the bad times. However, he also emphasises the need to keep an eye on cash flow and ensure costs and credit arrangements are manageable.

“The market has been buoyant,” comments Quegan, “but it ebbs and flows. Everyone needs to be careful as we do not know what the market will do in the coming months. 2021 may start strong or it may tail off due to the release of pent-up demand. Personally, I would advise dealers to be thinking carefully about their business model and working closely with partners, like ourselves, to ensure the decisions they are making are sustainable.” He goes on to highlight the importance of close relationships with dealer partners, emphasising the active support plans the organisation has put in place.

As soon as they were cleared to do so, NextGear Capital team members got back out on the road seeing dealer customers. The positive feedback from dealers was overwhelming, with many suggesting how grateful they were to have someone to listen to them, problem solve with them and work with them to access stock with appropriate credit. Quegan concludes: “We’ve had a human face to our business during what has been a difficult time and that has been recognised by our dealers and our team. That is a big deal for us.”

NextGear Capital supports more than 1,600 dealers in the UK, with Stocking Plans available to fund part-exchanges, trade purchases, private purchases, existing stock, and auction purchases. Dealers can also benefit from StockMaster, the UK’s only ‘on the go’ solution to view and fund pending vehicles in one place.

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To watch the full interview, click here or listen via Spotify or Apple Podcasts (search for Cox Automotive).