Technology trends are beginning to disrupt and reshape the retail financial services industry in a significant way. A new suite of digital tools and services are changing the way we interact with financial services institutions. While the option of applying online for automotive finance has been around for some time, we look to investigate if consumers are engaging with the online channel and what the barriers to future uptake are.
The Automotive Finance Insight report, recently published by ACA Research, shows how car buyers use online resources across the different stages of the customer journey. There are many different journeys, but typically the journey begins online and then transfers to face to face. Compared with 2011, online channels are playing an increasingly important role in the early stages of the customer journey.
This increased activity in online channels when searching for finance is supported by an analysis of the search term “car loan” in Google Trends. The chart below shows that the peak activity over the time period from 2004 to 2013 was in 2013.
Google Trends: Occurence of Search Term "Car Loan" 2004-2013
How is this increased digital activity in the search for information about lenders and products impacting on the way consumers apply for finance?
Online applications for automotive finance have increased by 32% from 2011 to 2013. While that is a significant increase, this still only accounts for a quarter of car buyers who used finance to purchase their vehicle. The majority of car buyers are still using more traditional channels.
What is holding consumers back and what would encourage more car buyers to apply for finance online?
The main reasons for not applying online are a sense that better deals can be obtained by talking in person with a sales representative, privacy concerns, and being able to check details with someone. More car buyers would apply online if they were confident the best deal was available online, if someone was available to answer any questions, and if all the relevant documents could be sent electronically. Fundamentally this boils down to price, convenience, and reassurance.
Lenders are constantly evolving their online tools and mobile products to help car buyers navigate the online application process, including apps that can scan vehicle identification numbers, compare the average retail cost of a vehicle, and complete an online application. Combine this with tools to compare lending products and find the best deals, the next generation of technology is likely to lead to further growth in the use of online channels.
Please contact us if you are interested in purchasing a copy of the full report Automotive Finance Insight 3rd Edition, 2013. Or if you would like to keep up with all the latest automotive finance news, subscribe to our monthly newsletter by clicking on the link below.