The latest automotive industry research reveals how digital channels are changing the automotive finance customer journey.
2016 looks to be another record year for the Australian automotive industry, with new vehicle sales set to surpass the record set in 2015. With interest rates at historically low levels, car ownership is more affordable than ever before and total automotive lending commitments in the 2015-2016 financial year reached more than $15.5 billion.
It is in this market context that the latest edition of Automotive Finance Insight (AFI) has been released by ACA Research. This is the 5th edition of this unique and extensive survey of the finance journey undertaken by new and used car buyers throughout Australia. Highlights of the report include:
The Customer Journey Continues to Decrease
The 2016 Automotive Finance Insight report clearly shows that the length of the customer journey is decreasing, with the length of time from developing a shopping list of vehicles through to making a final choice down to a median of just 4 weeks. It is clear that the effort required to compile and refine a shortlist of desirable brands and models has decreased as the depth of information that is accessible online increases exponentially.
Consumer Power Enabled Through Technology
Two thirds (66%) of consumers are spending more than 6 hours researching vehicles online, using a range of manufacturer, dealer and other automotive websites. Accordingly, by the time the consumer reaches the dealership they are very well informed and often ready to buy.
Consumers are also commencing the finance journey much earlier, with more than half choosing their lender prior to entering a dealership, including 46% who obtain pre-approval from at least one lender. This presents a considerable challenge for dealerships that rely on finance as a key revenue stream for their business.
Currently, 34% of consumers are securing their finance through the dealership, but this has decreased from 40% in 2013. This underpins the need for OEM’s and dealership groups to consider how they can intercept customers before reaching the showroom, or provide a more compelling finance offer that ensures customers will not commit to major banks and other financiers before they choose their vehicle. While low interest finance offers have been successful for OEM’s to drive vehicle sales, the research shows that the lack of transparency in these offers has caused negative customer feedback, which ultimately impacts future behaviour in terms of loyalty and advocacy.
The Rise of the Online Broker
The research indicates that nearly a third of car buyers browsed an online finance broker website during the search process and 16% used a broker to secure their finance. ANZ and Macquarie Bank (including Esanda) are currently the greatest beneficiaries of the broker channel.
Again, the growth of the broker channel, particularly online brokers, will place more pressure on the current OEM finance model as disruption continues.
The Online Application Process Is Inefficient
While digital channels are changing the way consumers search for vehicles and finance, the proportion completing their finance application online has plateaued at 18%. Completion of online finance applications is highest amongst CBA customers (38%).
Generally, the customer experience when completing an online application is poor and implies a higher level of effort than should be necessary in the application process. With artificial intelligence and chatbot technologies (such as Flamingo.io) now being introduced by financial service companies to assist customers through the application process, it will be interesting to see if lenders will use the online application process as an opportunity to differentiate.
In summary the ACA Research Automotive Finance Insights report clearly demonstrates that in a highly competitive automotive finance market, traditional lenders will need to evolve their distribution, technology and marketing strategies to ensure they remain relevant in a sector rife with disruption.
About The Survey
The report is based on a nationally representative sample of 1,983 Australian consumers who bought a vehicle costing at least $7,500 since 2014. Of these, 1,186 respondents did not use finance and completed a short survey and the remaining 797 respondents used finance to purchase their vehicle and completed the full survey about their vehicle and finance purchasing journey.
About The Report
The full report provides detailed insights about:
- How consumers finance the purchase of vehicles in Australia,
- Their purchasing behaviours and decisions,
- Trends and attitudes regarding automotive finance products &
- Market penetration of the leading finance providers.
The report is now available to purchase for $7,499. Additionally, ACA Research can also tailor a report extract to suit your information needs and budget.
Register your interest or to purchase visit: http://www.acaresearch.com.au/afi-register-australian-automotive-finance-insight-2016 or below.