Auto Trader, the UK’s largest classified vehicle site, has revealed plans to promote dealer finance on its listings, pending the dealer’s agreement.
At a Christmas briefing in London, the website said it had been trialling the scheme with a limited number of dealers until now, with a reported 35,000 adverts including monthly payment on the page. This compares with the total 500,000 cars listed on the site.
Instead, dealers will be able to choose which of their dealer partners to display, and an appropriate APR rate, and this will be displayed on the vehicle page, underneath the total RRP.
The offer will only be available on cars £2,000 or above, and younger than 12 years old.
Speaking at the event, Trevor Mather, Auto Trader’s chief executive, said the site recognised that the amount of dealer finance sold in the used space could be higher, and that he hoped the new offering would improve the penetration of dealer finance.
He noted: “There has been a pretty stagnant percentage of used car vehicles that have come under dealer finance. A lot of people are still getting loans out before they arrive at the dealership, either from their bank or from car finance specialists. And they're generally unsecured.
“You can actually get a better deal these days on secured loans in a dealership. Most consumers don't know that. We're trying to get that advertised, so that you therefore increase the percentage of finance products that are sold in the dealership. If you can increase that, then there is more commission that is going to come to dealers.”
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Getting the message out there to consumers at this stage of the customer journey is often key, said Karolina Edwards-Smajda, Auto Trader’s retailer and consumer products director, because the majority of consumers will have researched their finance options before they even step foot in a dealership.
In fact, quoting Auto Trader research, Edwards-Smajda said 74% of consumers will not only conduct this research online, they will also make their decision online. “So if they don't get visibility of those dealer finance offers upfront, it's not something they'd consider as part of their buying process,” she said, adding: “This is why it's extremely important that we help dealers make those monthly prices more transparent, so consumers get more familiar with it. This way we can drive adoption of used car dealer finance.”
There had been rumours circulating that the retailer was contemplating becoming something of a lender itself, but this was categorically denied by a number of senior executives on the day. Instead, all finance enquiries will go directly to the dealer.
In terms of what is being displayed, the site will show the monthly payments assuming the finance term is for 48 months, with a 10,000 per annum limit.
Auto Trader is currently looking to ramp up the number of dealers signed up to show finance, and to that end, the product will be free until sometime in 2018.
Once a sufficient scale has been reached, Auto Trader plans to launch a ‘search by monthly payment’ function.
While 2017 might seem a little late to be offering a search by monthly payment option, according to Mather, it was considered more important to get it right than to release it early.
He said: “The search by monthly payment is not going to be a default APR. That's easy to do, we can do that tomorrow in a heartbeat. This is going to be 'this is the experience you will have in every dealership.' That's different. What you're going to have is dealers inputting their information that says 'this product for this kind of car has an APR of this', so they're putting their best foot forward for each type of car, in each type of dealership.”
The challenge with this wasn’t technical, he said. Instead it is a question of increasing the penetration of dealers showing their finance rates. “It's not a great experience if you’ve got 500,000 cars to choose from, if there is only 40,000 cars to choose from in the car finance search,” he noted.
Auto Trader has traditionally partnered with Zuto to take care of the finance side of its business, and the plan is for this to continue alongside the new finance offering.
According to Mather, there are a number of consumers who benefit from the ability to use a company such as Zuto over dealer finance. These include those looking to buy from a private seller, or those with a subprime credit rating looking to buy from a dealer who doesn’t have a subprime offering. In a number of cases, dealers may not offer any finance at all, in which case Zuto would provide an option for secured finance.
While Zuto will be applicable in these situations, Mather did admit “We will be reducing, substantially, the marketing of that kind of product in the new world, and increasing the marketing of this product [dealer finance].”
Fundamentally, however, he added: “But if you come in from the top level, which is 'I want to know about car finance', you will see that you can go either way.”
On the topic of credit ratings, Mather said Auto Trader had tried offering searches by credit ratings in the past, however found this could hurt consumer ratings by performing additional soft checks. As a result, he noted the website found very few people wanted credit searches at this stage in the car buying journey.