Automotive’s evolution is dealerships’ opportunity
Rebecca Duckworth explores how new technology can enable the automotive finance industry to create new business models and capture fresh revenue opportunities
The decline of in-person business during lockdown added an extra dimension of urgency to an evolution in the automotive market that had begun long before the pandemic struck. COVID-19 has accelerated the shift towards online buying, while the rise of new leasing models is driving the transition from ownership to usership. Dealers know that they must adapt if they are to survive and thrive in this fast-changing market. Fortunately, the evolution of the automotive industry—particularly in financing—presents dealerships with a once-in-a-generation opportunity. They just need to seize it.
Our industry faces a fork in the road, brought nearer by the experience of the pandemic. Dealerships need to adapt to the new normal; to do this, they must harness the power of digital technology to support new leasing structures.
The rise of fleetail and PCH
Great events can act as a catalyst for change. Just look at how the credit crunch drove a boom in personal contract purchase (PCP), enabling people to access vehicles they would never have been able to buy outright by lowering monthly expenditure versus traditional hire purchase.
Similarly, the pandemic has spurred interest in leasing in general, and personal contract hire (PCH) in particular. PCH is perfect for a new generation that doesn’t want the burden of owning a vehicle, yet still wants to drive the latest and best models. This new leasing structure brings much greater simplicity: with no option to own it at the end of the lease, customers know they only have to pay rental and VAT, stick to their agreed mileage, and they can hand it back with reasonable wear and tear.
From the advent of electric vehicles to the rise of PCH and fleetail, the way consumers buy vehicles is undergoing its biggest shake-up for generations
With PCH, customers benefit from the enhanced clarity, cover and flexibility of usership rather than ownership. Leasing provides them with the perfect way of accessing vehicles without a large upfront cost or worrying about periodic maintenance, while giving them more independence, enabling them to take advantage of a wide variety of deals from a range of manufacturers or funders.
PCH also supports a related development that is transforming the role of dealerships: the blending of fleet and retail (fleetail). It’s perfectly suited to businesses’ move away from company cars and instead offering employees extra salary to spend on vehicles. What’s more, it means a steady supply of cars coming back to the dealership, which is especially important given the dearth of new vehicles caused by the worldwide microchip shortage.
There are two ways that dealers can take advantage of this new opportunity. First, they can optimise their broker channel, since almost every dealership that currently offers PCH does so through brokerages. Or they can become a disrupter and assume the role of brokerage or leasing company in their own right.
Dealers must not forget they have a huge advantage in this market. They are already servicing vehicles throughout their existing contracts and have plenty of touch points with customers. They know from where the customer sourced the vehicle and how it is funded, whether the customer pays for maintenance themselves or if it’s covered under a maintenance package, and when the finance is due for renewal. With this information they can obtain the customer’s permission to contact them near the renewal date and sell them their leasing products before the broker or leasing company starts their renewal process.
This evolution can be accomplished in two ways: through developing stronger relationships and sales channels with the broker market, or by setting up their own leasing companies or brokerages—or both. Whichever road they choose, success depends on dealers harnessing the power of the latest technology to connect every stakeholder in the chain.
Seizing the opportunity
To be competitive and provide the stellar service customers expect, dealers need to update CRM and back office systems and move to a unified platform that joins the dots between themselves, financiers and the broker channel, or eases their evolution into brokers themselves.
The evolution of the automotive industry—particularly in financing—presents dealerships with a once-in-a-generation opportunity
Dealerships can now take advantage of a new generation of digital platforms designed for the automotive market which bring the industry together in one unified, all-digital platform. Having access to a ‘one stop shop’ enables dealers to source vehicles from a giant, country-wide network, while customers can choose whichever vehicle they like—and the funding for it—while still having the one-to-one relationship with their local dealership.
The benefits don’t end there. Using digital information systems enables new market entrants to set up their own brokerages without having to become a subsidiary, or pay AR fees or work with low-end marketing websites to facilitate deals. And perhaps most importantly of all, choosing the right information system (IS) squares the circle of regulation, ensuring that every communication, contract or other piece of documentation is handled in a fully compliant manner within the system.
From the advent of electric vehicles to the rise of PCH and fleetail, the way consumers buy vehicles is undergoing its biggest shake-up for generations. A number of companies, including QV Systems, are helping the industry move away from the legacy systems that act as a brake on dealerships’ ability to evolve and stay relevant to their customers. The key is to seize the opportunity COVID has afforded and future-proof dealerships by supporting new and better relationships with the broker channel based on firm, digital foundations.
About the author: Rebecca Duckworth isChief Sales Officer at QV Systems