Providing car loans and other forms of motor finance is a critical role of dealerships that must continue in the future as buying habits and technology advance, believes Mike Allen, the managing director of Cambria Private Capital, a firm that invests in and provides advisory services to automotive startups and scaleups.
In a period of low consumer confidence, car dealerships across the UK face a challenging landscape. The GfK Consumer Confidence Index plummeted to -20 in September 2024—its lowest level in six months.
And with the Autumn Budget unlikely to provide much of a fillip, innovation has become not just an option but a necessity.
The major purchase index, which reflects consumer sentiment around big-ticket items like cars, fell by 10 points to -23. These numbers highlight a reluctance among UK consumers to commit to large purchases, particularly new vehicles.
Among the most critical areas for innovation are finance and technology, two pillars that can directly impact customer acquisition and retention. By embracing the latest advancements in these fields, dealers can navigate the current challenges and position themselves for growth in a highly competitive market.
According to a study by Hitachi Capital Motor Finance (now Novuna), 80% of consumers reported that the availability of finance heavily influenced their decision to purchase from a specific retailer. Nearly half of the respondents (48%) admitted that they would spend more when presented with appealing finance options.
Conversely, dealerships without strong finance offerings risk losing up to 44% of potential customers. In today’s challenging market, this is a sobering statistic.
Finance is a key area where innovation will directly drive more visitors to websites, forecourts, and, ultimately, more sales. Dealerships that provide flexible, accessible, and tailored finance solutions will have a significant edge.
Car finance models are evolving rapidly, with new approaches tailored to meet consumers’ changing needs. Offering all-inclusive packages that cover the vehicle, maintenance, insurance, and other essential services can appeal to consumers looking for a hassle-free, flexible alternative to traditional ownership. Fintech companies such as Bumper have enabled drivers to spread the cost of repairs and servicing while helping to drive business for dealers.
The volume of second-hand EVs will inevitably grow, and finance is providing dealers a better chance of making these attractive to customers. Dealers can offer eco-friendly finance options, such as lower interest rates or extended loan terms for electric and low-emission vehicles.
These green incentives appeal to environmentally conscious buyers and support broader sustainability goals.
The digitalisation of car finance is transforming how customers engage with dealerships. Many consumers now expect a seamless online experience, and dealers who meet these expectations will be better positioned to capture market share. Streamlined digital processes, such as online credit checks, pre-approvals, and paperless transactions, remove barriers for customers considering finance options.
The speed and ease of these services enhance the customer experience and can lead to quicker decision-making on the dealership floor.
Mobile apps and online platforms have made it easier for consumers to compare, apply for, and manage their finance agreements. This reduces friction in the buying process and creates new opportunities for dealers to engage customers in real-time.
When combined with personalised finance offers tailored to individual customer profiles, the potential for conversion increases significantly.
Beyond finance, technology can also be used to innovate and improve the overall customer experience. The possibilities are vast, from AI-powered chatbots that streamline customer service inquiries to blockchain technology that enhances transaction security and transparency.
It is clear that dealerships investing in advanced technologies will improve customer satisfaction and operational efficiency. For example, AI can automate routine customer service inquiries, freeing up staff to focus on more complex tasks. Meanwhile, blockchain could offer long-term benefits in ensuring secure, transparent transactions for customers and dealerships.
Another key area of technological advancement is in personalisation and customer education.
Data analytics and artificial intelligence allow dealerships to offer tailored finance packages that suit individual needs. At the same time, dealerships can develop educational materials and tools to inform customers about their options and address common misconceptions about car finance.
Education is critical. Many customers still need help to explore financing options. By providing clear, accessible information and proactive communication, dealerships can help customers feel more confident about their purchase decisions.
Innovation in finance and technology also requires stronger partnerships between dealerships and financial institutions. By collaborating with multiple finance providers, dealers can offer competitive rates and more flexible terms to suit a wider range of customers.
We’re seeing more integration between car finance and other mobility services, such as car-sharing platforms and multi-modal transport subscriptions. These bundled services can provide even more value to customers and help dealers stand out in a crowded market.
By embracing digital transformation, offering flexible financing models, and leveraging advanced technologies, dealers can improve the customer experience and future-proof their businesses.
Dealers who innovate quickly and constantly will be well-positioned to succeed in this challenging market.
Author: Mike Allen, managing director, Cambria Private Capital