With 2.63 million new vehicles registered in 2015, up about 6% on 2014, and the fourth consecutive year of growth, experts are seeing pressure build on the used market in 2016. With the biggest March on record the trend is set to continue.
Used vehicles underpin dealer margins as the battle for new registrations becomes increasingly cut-throat and dependent on pre-registrations, which drive down margins and needs to be funded by the retailer.
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Two trends will push the importance of promotional finance up the agenda in 2016. Both are based on the growing importance of digital in motor retailing.
In an increasingly competitive retail market, an attractive finance offer will help attract customers to the forecourt and close a higher proportion of sales. It will also help to combat the growing influence of portals such as Carwow, which are capturing the consumer’s attention.
Google has mapped the car buyer’s journey and identified hundreds of ‘micro-moments’ where consumers turn to their mobile devices to answer a question or address a need. Experience tell us that the earlier an attractive finance offer can be introduced into the customer journey, the more impact it will have on enquiries and conversion.
Key moments such as ‘can I afford it?’ or ‘where should I buy it?’ are increasingly led by monthly payments. As buyers narrow their purchase options, cost comes into consideration and searches range around price, and finance route can steer a customer down a particular retail route. The appeal of promotional finance in this environment can’t be underestimated.
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By GlobalDataHitachi Capital Motor Finance developed a range of promotional finance products, including: interest free, interest bearing credit, ‘Buy Now Pay Later’ and countdown interest-free credit. Promotional finance products have already helped our dealers boost sales by over 11%.
APR-based models are simpler to administer, fairer to the customer, and are more profitable to dealers than traditional commission structures. As the issue of commission and placing business based on finance earnings, comes under increasing scrutiny, there’s an opportunity for dealers to adopt the retail model and increase profit.
Promotional finance has a key role to play in supporting motor retailers transition to online retail models, by capturing customers data and interest at the earliest stage in the purchase journey. Experts are warning that the vast traditional dealership network faces upheaval. Research by Auto Trader said footfall at dealerships in the UK had gone from 30 million in 2010 to a forecast 15 million this year. By 2018, that is expected to fall to 7 million. The increase in technology and mobile devices means that information is now available at the touch of button. They can, and do, shop any time of day, and the increase in omni-channel is a prime example of convenience and speed becoming ever-more important.
If dealers are to combat the threats of portals such as Carwow, an attractive monthly payment can offset headline discounts on RRP.
A clear and transparent finance offer is essential to their business. An APR-led finance product, with no fees, helps to build customer loyalty, and meet FCA requirements.
Jonathan Turner is strategic manager at Hitachi Capital Motor Finance
