The internet now dominates the day-to-day life of most people, with mobile phones now doubling as a pocket laptop in today’s society. With the fast pace of life dictating the need to do things quickly, the attraction of human interaction seems less desirable – but apparently not where car purchasing is concerned. Athena Chrysanthou writes.
Car sales remains an industry in which a physical dealership is important to consumers, pushing the ‘clicks and mortar’ approach, according to research from Startline Motor Finance.
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“While the consumer wants the facility to do things online, it is probably not going to replace that face-to-face contact, now or in the future” says Startline chief executive Paul Burgess.
For the study, Startline surveyed 57 businesses including franchise groups, independents, car supermarkets and online specialist brokers. It also quizzed 300 consumers who plan to purchase a car using finance in the next 18 months.
The Dealer’s View
One key headline finding of the survey is that 84.2% of dealers believe it is important for customers to visit their showroom, despite the growing presence of the internet in the purchasing process.
“If there is a single, clear and important message from the research, it is that both traditional dealerships and newer online channels are important to consumers,” Startline notes. “This ‘clicks and mortar’ model looks set to persist for the foreseeable future. Dealers are also very much aware of the potential of online, and are planning to invest in the short term.”
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By GlobalDataClothes and fashion (22.2%) and food and groceries (19%) are sectors cited by dealers as offering the best online retail experience. When comparing the car finance market against these sectors, 5.3% of dealers say it is ‘a long way ahead’, 19.3% say it is ‘slightly ahead’, while 29.8% say it is about the same.
That leaves more than 40% of dealers who believe the car finance market lags behind other sectors in offering the best online experience. “This is perhaps one of the reasons that extensive investment in digital capabilities is planned by many dealers,” says Startline.
With greater information now available to consumers through the internet, over half of dealers (52.8%) say customers have done some research in advance of visiting a dealership. Fewer than 10% of dealers believe customers have made decisions on vehicles in advance of a visit, while just 7.5% believe customers spend less time in the dealership due to increased online activity.
The general perception among dealers appears to be that online channels create issues around removing profit streams and additional expenditure. A quarter of dealers believe there is now less opportunity to upsell due to online activity, while 18.9% note the monetary impact of increased investment in IT systems. A further 15.1% identify the impact on finance rates due to competition.
Asked whether online retailing will have a significant impact on how the motor industry sells cars to consumers, 45.6% say it definitely will, some 28.1% say it probably will, and 17.5% say it may or may not. Just 3.5% of respondents believe that online retail will ‘definitely not’ impact car sales in the future.
Commenting on the data, Startline says a change in mindset will be required, while companies will have to invest and be able to offer a complete online customer journey.
It appears that dealers are paying attention to the online trend: 64.3% say they are planning to offer online finance, estimates and soft credit services in the next 12 months. High-resolution images, delivery estimates, add-ons and accessories, booking test drives and car searches also rank high on the list of features that dealers plan to introduce in the next year.
“Finance is clearly seen as the key area of online investment,” says Startline. “We would agree with this approach – affordability drives sales, and if dealers can get their online finance propositions right, every other part of the digital customer journey will follow.”
The Consumer’s View
Consumers appear to have a better view of the car finance market than the dealers themselves. Asked how the car finance industry compares with other sectors in terms of effective customer care, over three-quarters (76.2%) say it ranks either the same or better.
The data suggests that traditional methods of selling motor finance, such as face-to-face or over the phone, are regarded well by customers. Startline says: “They feel that it is an experience ahead of many other sectors that are perhaps generally perceived as having better reputations for customer service – something that has perhaps been aided by increased regulation.
“To us, it seems that this is a solid base of trust on which the industry can build for the future, and also a signal that there remains a strong attachment to buying cars and finance in face-to-face situations.”
Consumers were then asked to compare the online experience of the car finance industry against other sectors. Again, those surveyed back the car industry – with seven in 10 respondents saying the car finance sector is about the same or better than other markets.
“This is a reasonably encouraging result for our sector – although there clearly remains room for improvement,” notes Startline.
“It perhaps shows that while there is a widespread perception across the motor finance sector that we often receive negative coverage as an industry across the media, the general public has a relatively favourable view of what we do and how we work.”
If the functionality existed, over half (55.3%) of consumers say they would choose to buy a car entirely online, while 5.7% have done so already.
When quizzed on the future importance of the local car dealer, 88.3% of respondents say the dealer would either be ‘nice to have’ or ‘essential’. Just 3.7% say the dealership would not be needed.
Seeing the vehicle is cited by 85.7% of people as the most popular reason for visiting a car showroom, followed by test driving the vehicle (79.5%), discussing finance (56.4%), asking questions and getting advice (55.4%), and discussing a part exchange (46.6%).
This highlights the continued importance of the physical experience. More so than other sectors, the need to see and try out the product is of paramount importance for many customers. For a major purchase like a car, it makes perfect sense, according to
Startline, and such an experience cannot be replicated in the digital world.
When it comes to securing finance for their vehicle, the majority of respondents said they will want to use finance provided by the car dealer, further highlighting the importance of the dealer in the used car finance space.
“The good news for motor finance is that the consumer has quite an upbeat view of our sector and, it seems, dealers in general,” reads the report.
“In an industry that often gives itself a hard time about its reputation, our research shows that we score more highly than many other sectors that are probably considered more consumer-focused. Perhaps increased levels of compliance are having a positive impact.”
Future Concerns
Rather than the impact of online channels, electric vehicles (EVs) are cited by over a third of dealers (33.7%) as the biggest challenge for the future retailing of used cars.
Startline points to concerns around difficulties financing EVs and the reduced need for servicing, with EVs expected to spend less time in the workshop, reducing potential profits in that area.
Compliance requirements are cited as the primary concern for 18.9% of dealers, while negative equity in diesel cars is the main issue for 13.2%.
Despite the challenges faced by dealerships, Burgess says he believes that for the next 20-30 years, visiting dealer showrooms is going to remain a priority for consumers.
“They may look very different than today, but I think that ability for a consumer to touch and feel their big investment will remain super important. It is a really strong message coming out of the research,” he concludes.
