Andrew Ballard, head of strategy at Experian Automotive, believes competitive finance deals and better use of data can build upon the buoyant new car market.
Motor dealers can look back on 2014 with mostly fond memories. New car sales increased by 9.3% last year compared to 2013’s figures from the Society of Motor Manufacturers and Traders (SMMT), beating industry expectations and reflecting growing consumer confidence.
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Three-quarters of these new vehicles were sold on finance, according to the Finance & Lending Association, with personal contract purchase deals alone accounting for £714m of business.
A combination of low inflation and reduced fuel prices should continue to attract people to the forecourts in 2015, although the SMMT only forecasts growth of 0.5 per cent over the year.
So, what’s behind the increasingly healthy market? Attractive and affordable finance deals have certainly contributed to the record-breaking figures. Dealers are offering low or zero deposit finance deals or discounts on PCP and hire purchase deals to tempt people to change their car.
From talking to many of our customers and partners, there’s definitely a shift in demand in the new car market essentially to ‘rent’ a vehicle rather than go for outright ownership. There seems to be less emotional attachment to owning a car because people are more aware of the cost of depreciation and have a desire to manage their monthly budgets more responsibly.
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By GlobalDataWhat dealers will need to keep in mind in 2015 is the rising numbers of new cars being sold will one day come back onto the market as used cars. Consumers are increasingly thinking about the lifetime costs of owning a car, so the industry is increasingly offering used car finance in combination with service and warranty packages to meet this need.
Car buyers are not the only ones thinking about the long-term costs of car ownership. Dealers and lenders are going further than before to match people to affordable loans, which should result in fewer repossessions and cases of bad debt, along with improved customer relations. While a key driver for this is regulation, it clearly makes sense to consider good customer outcomes and longer term relationships rather than just the one-off deal.
Better access to new and insightful data throughout the vehicle purchase and ownership cycle, both on the vehicles and the people buying them, will be key. But 2015 will also be the year when people will be able to carry out their own pre-qualification checks without leaving a footprint on their credit report, and arrive on the forecourt knowing exactly how much they will be able to borrow and, therefore, what they can afford. These checks are increasingly being used both online as well as in showrooms as people select the most appropriate channels and buying process or journey for them.
The industry must also spend some time in 2015 focusing on used cars. With the growth in personal contract purchases and changing attitudes towards vehicle ‘ownership’, the used car market is set to take off. The challenge will be ensuring the vehicles being replaced are then sold on as used vehicles at the right price. Getting this right is complex. It will require everything from setting accurate rates, building specific used car finance products and monitoring residual values, to having robust remarketing processes and manufacturer-approved used programmes.
