Jonathan Minter speaks to Paul Harrison, head of finance at Auto Trader, about the impact of the internet on the new car market
Last month we spoke to Carwow. It was under the impression that online has had an extremely limited impact on the new car market from a selling perspective. What’s your opinion on this?
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It depends what you mean by selling. In terms of the transaction itself, that may be true. Fifteen years ago some commentators were forecasting the demise of the dealer, thanks to the expected dominance of clicks over bricks. But that just hasn’t happened: every trial of pure online sales to buyers has failed because the human element is so important in every car transaction.
Where the internet has dominated however is in terms of improved transparency, the availability of information and the ability of consumers to research anywhere and at any time thanks to the growth of smartphones and tablets. Loyalty to one brand over a lifetime is largely a thing of the past. Most buyers spend weeks researching sites like Auto Trader, narrowing down choices and weighing up options, before finding a dealer or going onto a manufacturer’s website.
What would be your ideal customer journey for buying a car online? Should there be any difference between new and used? What are the barriers to achieving this?
Latest Auto Trader research suggests that the barriers between buying new and used have broken down significantly. More new car buyers consider used en route to their next model, and more used car buyers will consider new. It’s not really about new or used any more, it’s all about next. What’s the next car for me, and is the deal right.
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By GlobalDataSo in my view there shouldn’t be any difference. The online journey should be seamless, whether the deal is for a £500 run-around or £40k new family saloon. Bottom line: buyers should have all the information they need to make informed choices because that’s what they expect. That includes things like finance options, part exchange valuations and insurance options.
I guess there’s no ideal journey because everyone is different. But making each trip as smooth as possible should always be the goal, because that supports consumers, and as a consequence helps drive business for dealers and financiers. In a smooth marketplace everyone wins.
You obviously have access to a lot of data about customer habits. What insights has this given you that Motor Finanace readers (i.e. brokers and lenders) could use?
One of the most significant things for Motor Finance readers is the dominance of the ‘full page advert view’ as a pivotal point in the research journey. This is the point at which an online browser has selected a car of interest and is drilling into its detail, price, specification, dealer location etc. It’s incredibly important because it’s where a browser becomes a hot prospect. Cast your mind back 20 years and the equivalent would be when a forecourt browser had just sought the keys from a dealer to look under the bonnet and inside a chosen car.
A great online advert with lots of detail will draw in a buyer. But equally a viewer will be put off by a bad one that doesn’t give them everything they need. Our research suggests that if you give buyers what they need on the full page advert view, they’re more likely to do a deal. Finance will be a key part of this process and we’re currently trialling a product that would allow dealers to display lender examples. If consumers can quickly see how much the car they are interested in would cost them each month, it allows them to make quicker and more informed decisions.
You’ve recently started using a ‘help me choose my car’ model of search. What was the thinking behind this? What has the reaction been to this? What results have you seen that you can talk about?
Internally, we sometimes call this discovery search, because it’s really a tool for those who are less certain in their choices or are open to alternatives. Perhaps they know very little about cars and brands, or simply wish to search via lifestyle choices rather than by make and model.
It’s all about making the journey as straightforward as possible for all Auto Trader users and, since launch last year, the ‘help me choose my car’ facility has been incredibly successful.
When in the car buying process would you ideally see a customer start to consider the finance? Where do they now?
Our research shows that 92% of consumers have already decided how they intend to pay for their next car by the time they reach the showroom. This means discussing finance options with consumers at the point of sale can be a very difficult for dealers, especially in the used car market where there are fewer subsidised deals.
Like all other big car buying decisions, funding is also decided through online research. Presenting transparent and competitive finance offers is therefore crucial to ensuring dealer finance is fully considered, whether this is through dealers, manufacturers or portal websites. We believe the earlier finance is presented online the better as affordability has a huge bearing on why consumers select specific cars over others.
What is Auto Trader currently exploring related to car finance?
Auto Trader is exploring how best to help motor dealers promote their own finance offers to potential used car buyers. Earlier this year, we launched a ‘finance discovery’ to understand better how we can best display car finance information on dealer’s full page adverts and what information car buyers really want. To do this, we’re working with a small number of showrooms which are advocates of online car finance and which have agreed to provide us with their feedback and data regularly.
How can online car retail platforms, such as yours, encourage a greater penetration of finance? What is Auto Traders’ incentive for doing this?
Auto Trader is the leading automotive marketplace in terms of both stock levels and audience. As well as audience volumes, consumers turn to marketplaces such as ourselves at an earlier stage in their research; a stage where key decisions are formed and usually before they carry on their research on manufacturer or dealer websites. So if we’re delivering an audience and influence on finance then we’ll look to monetise the value that we can prove that we are providing to retailers. We’re currently analysing the value that our product provides and how it benefits dealer’s finance performance.
What else are you working on regarding car finance?
For a number of years, we’ve partnered with Zuto (previously Car Loan 4U) to help offer finance to consumers browsing private car adverts on Auto Trader. This facility helps consumers better understand what they could borrow and the cars available in their price range. The partnership also helps retailers to secure additional sales from consumers that they would not have otherwise seen on their forecourt because they’ve come to Auto Trader (and Zuto) for help with their finance options.
