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Automotive finance as a key differentiator in the market

Your finance experience could help your automotive brand stand out in an increasingly crowded market. Here’s how.

Your finance experience could help your automotive brand stand out in an increasingly crowded market. Here’s how.

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23rd August 2023

man crossed armed smiling at the camera

Jerry Young

Almost a year ago, we set out to identify who owns the auto finance end consumer—and we realised there wasn’t a clear answer.

Since the pandemic, the relationship between finance providers and their consumers has changed significantly. What was a once-clear connection is now blurred by new engagement methods and changes in finance options.

The lines between manufacturers, lenders, and dealerships are continuing to change too. There’s much greater complexity in the market today, with shifting consumer purchasing behaviour and manufacturers exploring new ways to reach the end consumer.

The consumer now has more choice in where—and how—they purchase a car than ever before. And it means that for manufacturers, lenders, and dealerships, standing out in the market is even more difficult.

But as the purchasing experience shifts more towards customer convenience, automotive companies can use their finance processes as a key differentiator from their competitors—if they take the right approach.

Why finance is so important in 2023

One of the key elements we highlighted last year was how quickly automotive finance is changing.

During the pandemic, we saw a significant decrease in vehicle sales. From semiconductor shortages to reduced consumer spending, dozens of factors contributed to lower sales—and it took over a year to reach normal figures again afterwards.

Now, as the cost of new and used vehicles continues to rise due to higher labour and material costs, inflation, and demand, finance has a greater influence on consumers’ purchasing decisions.

In many instances, high costs are encouraging consumers to take on more debt to finance their purchases—including those who may not have engaged with finance options previously. The Finance and Leasing Association recently reported that June of this year saw growth in the car finance market, rising 14% in value and 11% in volume since February.

Many consumers are also switching to the used car market. And while finance options have historically been more popular in the new vehicle market, the number of used cars bought on finance in the UK has increased by 13.5% since 2022—and is now over double the number of new cars bought on finance.

But it’s not just higher costs changing the role of finance in the purchasing process. New technology is evolving its role even further and creating more opportunities for finance providers and dealerships to engage with the end consumer.

Digital platforms are transforming the finance experience

In the used car market, digital platforms like webuyanycar and Cinch are attracting consumers by offering faster, more convenient ways to purchase and trade in vehicles.

Meanwhile in the new car market, which previously relied on dealerships and retailers, more manufacturers now sell directly to consumers using digital platforms.

In both markets, each digital experience needs to cater for multiple origination journeys too, depending on whether it’s designed for a consumer or business customer. Within these journeys are also different types of finance—such as lending, PCP, and hire purchase. But crucially, all of these are subtly different products, and all contribute to greater complexity in the market.

As consumers shift to online purchasing, building convenient digital finance experiences that cater to all these products will be a major differentiator for brands. And there’s potential for these experiences to become just as important as the vehicles themselves.

This idea is especially clear in the electric vehicle market. The market is currently led by Tesla, a digital-first giant that offers few models of its vehicles but heavily prioritises seamless online purchasing experiences for its customers. And this mentality is quickly setting a standard for traditional automotive brands to reach as more compete in this market.

As industry expert Simon Oldfield explained at our recent roundtable: “With electric cars, there’s less to differentiate on. You don’t have different engines or characteristics to choose between. Instead, the differentiator is in the personality of the brand […] and a big part of that is the quality of the customer’s interaction online and with your finance company.”

To stand out in the automotive industry over the next few years, brands will need to adopt a new way of thinking and embrace the changes happening in the market today. And part of that will involve designing engaging digital experiences.

A chance to get closer to the end consumer

The finance providers and dealerships that deliver seamless, consistent, and intuitive experiences for all types of customers will ultimately be able to build greater connections with end consumers. And, crucially, own more of the customer journey.

But it’ll require finance providers to create more flexibility in their online applications—and find the right partner that’s agile enough to help them evolve their applications as the market changes.

This will mean building faster, more convenient application processes tailored to specific customers and complete with unique origination journeys for different segments.

For example, personal customers and sole traders will look for user-friendly features such as finance calculators to offer a clear picture of the agreement they’re making. On the other hand, the application journey for business customers will require seamless connections to third parties such as Companies House to capture their information effortlessly and allow lenders to make quick decisions.

These unique origination journeys will also need to be combined with additional options that cater to all customer needs—from insurance and tax to servicing and collection. And forward-thinking providers will need to build in the scope to expand these add-ons as the market evolves.

While it’s a lot to deliver on, the finance providers that will be able to unite all these factors in a consistent online purchasing experience will stand out in the market, and inevitably win and retain more customers.

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