The majority of UK dealers plan to invest in online finance capabilities in the next year to improve customer service, according to new research.
By enabling customers to source finance quotes online, and potentially purchase vehicles, dealers aim to close a key gap in the customer journey which many believe puts them behind other business sectors.
Online services would need to link seamlessly to the showroom experience to create a smooth customer journey, as both dealers and consumers agree that a showroom visit is a vital part of the buying experience for most buyers. Around 7 out of 10 car buyers would be happy arranging car finance online.
Paul Burgess (pictured), chief executive officer of Startline Motor Finance, which carried out the research as part of its Future of Motor Finance in the UK report, said: “Dealers are less confident about the online experience they provide compared to their in-showroom performance with more than 40% believing that the industry lags behind other retail sectors. This is perhaps one of the reasons that extensive investment in digital capabilities is planned by many dealers.”
As part of the finance journey, dealers prioritise fast decisions and a good acceptance rate, which is supported by their use of panels of finance providers, which are continuously reviewed to meet the needs of customers.
Dealers believe prime lenders are tightening up on their portfolios, a situation that is likely to become more acute in the next year, so almost half have revised their lending panel and three-quarters believe near-prime finance will become more important.
Near-prime finance acts as a bridge between prime and non-prime finance, which avoids a potential cliff edge when it comes to interest rates. Four out of five dealers see a near-prime offering as important or somewhat important to their business.
Burgess said: “Dealers are increasingly viewing their lending panel in more sophisticated terms, with a range of different risk appetites for different kinds of used car buyer.
“Clearly, near-prime is a part of this; this is a market that is moving closer to serving the needs of all used car buyers by providing a wider range of option.”
This includes adapting to the changes created by a growing number of electric vehicles available in the used vehicle market.
Startline Motor Finance research found that 38% of dealers see EVs as the biggest challenge facing them in the future and 36% believe financing them will be difficult.
Burgess added: “The vast majority of dealers now view EVs as an inevitability, although there is clearly some concern over their impact. Dealers are probably hoping to integrate them into a standard existing sales model – something which may simply not prove to be possible.”
Research for the Future of Motor Finance report was carried out by APD Global Research.