The automotive finance market has grown significantly over the last decade, with 6 in 10 people (60%) having bought their cars on finance in 2022. That’s according to JATO Dynamics’ latest consumer research: “Driving Decisions with Data: Global Automotive Consumer Finance Insights”.
A number of factors are prompting the shift away from traditional ownership models, with nearly a third (31%) citing affordability – ‘not having to pay a large sum upfront’ – as the primary motivator for leasing a vehicle.
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This is followed by a quarter (25%) of people that believe buying a vehicle on finance allows them to get a better car, and the same number saying finance options are better for budgeting.
With 6.61 million electric vehicles (EVs) sold globally in 2022, consumers are also considering their finance options when it comes to pure electric and hybrid drivetrain systems.
In fact, with 8 in 10 (80%) respondents saying the option to pay monthly would make it more likely for them to choose an EV, financing options could have a clear role to play in the global drive to net zero.
Range anxiety a ‘stumbling block’ for EV ownership
According to the report, 1 in 5 (21%) are set to buy an EV next year, while a further 27% are thinking about buying an EV. With good battery range (51%) cited as the top reason that would encourage respondents to buy an EV, followed by convenient recharging (45%), monthly finance options will allow consumers to try before they buy – with the potential to ease widespread concern over range, and charging availability.
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By GlobalDataMike Bennett, product manager at JATO Dynamics, said: “The skyrocketing EV market opens a world of opportunities for OEMs and dealers. But with any major industry transformation, these opportunities don’t come without challenges. Alongside finance options, other factors – such as the reliability of EV charging – will play a significant role in the mass adoption as more consumers look to try EVs.”
Alternative ownership options increasingly interest consumers. In the next two years, more than half of respondents (51%) are planning to use a shared ownership model, with half of those citing the reduced cost as their motivation.
Higher-quality vehicles (34%) and lower prices (33%) are significant aspects driving the growth in appetite for shared mobility services, while location – with 73% of those living in city centres wanting shared ownership in comparison to just 19% in rural areas – can also be seen as a spurring factor.
Maintaining finance relationships
Exploring what customers are likely to do at the end of a finance agreement, the research found that for 37% of people, the end goal would be to pay off the agreement to own the car, while 22% would swap to a different agreement on a new car, and 18% would enter into a new agreement on the same car.
Bennett continued: “How people purchase and pay for cars is changing, but our most interesting finding was that consumers across all regions want more transparency in choosing finance contracts.
“Increasing demand for alternative ownership models could disrupt the market and offer new opportunities for OEMs and dealers, but only if they focus their efforts on education.
“From finance types and contract lengths to payment terms and mileage options, consumers need to easily access and understand this information before they’ll be ready to embrace this as an alternative way to purchase their vehicles.”
Government incentivisation needed for EVs
Government research in the UK confirmed that vehicle trade-in offers and the ability to take out a finance arrangement with the same company are important in finance options.
However, the ability to incentivise and maintain customer relationships once a contract is coming to an end is founded on the accuracy and relevance of the options a manufacturer can provide.
By analysing the finance landscape from the customer’s perspective, OEMs and dealers can ensure they’re informed, with accurate insight to help precisely benchmark against the competition, and drive growth.
To read the full “Driving Decisions with Data: Global Automotive Consumer Finance Insights” report, click here.
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