Consulting firms Capita and Finativ have co-authored a whitepaper highlighting the need for disruption in the motor finance industry similar to the revolution in electric vehicle space.
The paper outlines the gap between the vehicles customers are buying and how they pay for them.
It says the motor finance industry’s fundamentals are still in the age of the internal combustion engine.
The authors of the report cautioned that if motor finance providers do not embrace the latest trends and offer flexibility, they will be left behind peers that do.
The key highlights of the paper say that traditional motor finance providers could lose their market share of the next generation of motorists if they fail to adopt a model of private car ownership that includes the vehicle, insurance and electric/fuel.
Although lenders have the technology and resources to provide services via the “pay-per-drive” model but the fear of alienating traditional dealer and franchise relationships has kept many financial institutions from applying this to motor finance and leasing sectors.
Despite the headwinds that the sector is facing, motor finance providers have to opportunity to cater to all aspects of car ownership such as bespoke financing, car-sharing technology and mobile payments.
With dwindling car brand loyalty among young motorists, finance providers can leverage it to their advantage to attract and retain customers by capitalising on loyalty fostered by current accounts and mortgages.
Motor finance providers can also offer hybrid propositions of car rental and public transport access from the app/monthly subscription.
Capita financial services businesses managing director Aparajita Ajit said: “The current model for private car ownership – paying separately for the vehicle, insurance, and electric/fuel – could soon go the way of smoky diesel engines.
“The winners of the hearts and wallets of tomorrow’s car buyers will meet the needs of a generation more accustomed to Apple Pay and the Spotify subscription model than more traditional payment methods. The message to the existing motor finance players is clear: do not risk getting caught sleeping at the wheel.”