Auto dealer software provider iVendi has observed that dealership managers are increasingly looking to technology suppliers to help them create the new operational models needed to restart sales while many employees remain furloughed.
James Tew (pictured above), chief executive officer of iVendi, said: “People running dealerships have found themselves in a position where they need to design and engineer processes needed to operate reserve-and-collect and home delivery models in, often, a matter of days or weeks. They’ve been trying to achieve this while large numbers of their staff have been furloughed and so have often been forced to look to technology suppliers to help them solve problems.
“The big problem to solve, for the majority of dealers, has been lining up online and physical processes. You can set up an online sales process relatively easily but there needs to be real world fulfilment to run in parallel."
Current vehicle reserve-and-collect software solutions serve as a means from which dealers can structure their entire reserve-and-collect sales model in a way that is directly aimed at virtual sales. Furthermore, technology solutions have arisen to change the way dealers communicate and negotiate with customers.
Supporting this point, financial services provider MotoNovo Finance has forecast that the pandemic will accelerate the move to self-served online finance, potentially leaving the dealers that have not pursued digitalisation behind.
The company also warned that if dealers are unable to adapt to digital trends, then consumers may be more inclined to use one of the more easily accessed online financing alternatives.
This was illustrated by iVendi’s recent announcement that there has been a 53% increase in the number of motor finance applications made online – through the company’s digital platform – since just before the lockdown.
The comparison was made from figures at the beginning of March this year through to the end of June, and shows the speed at which dealers across the UK have managed to adapt their business models to focus on digital sales.
Karl Werner (pictured above), deputy chief executive officer at MotoNovo Finance, said: “Digitisation and regulation were already directing change in dealer finance; COVID-19 has moved the dial from ‘high priority’ change to ‘crucial’, and ‘critical’ is probably just around the corner. Dealers need a fresh 21st-century finance approach. Which is why we are calling for dealers to commit to a fundamental change in their finance model that MotoNovo is supporting with a new financing approach - MotoRate.”
MotoNovo Finance’s new finance approach, MotoRate, offers a risk-based model that aims to meet the accelerating trends in customers’ personal finance engagement trends, and was developed with the FCAs paper on motor finance in mind. The FCA stated that the industry should “keep the ability to price for risk and offer promotional discounts to consumers when appropriate”, and so MotoRate was built around this pricing ethos.
Many of the 100 automotive dealers who engaged with the pilot of MotoRate identified the process of adapting to digital change as uncomfortable. However, with the correct level of support the vast majority made the transition successfully and benefited from an overall 40% increase in finance penetration.
Werner continued: “FCA changes are still coming and the regulator has provided a clear steer that financing models that give motor finance brokers/dealers an incentive to raise customers’ interest rates will be banned. Dealers can move to a flat-rate structure, but doing so could rob them of a significant low headline APR rate opportunity to compete with personal loan providers. All of our evidence demonstrates that with MotoRate, dealers can have a low headline rate and a better income platform for the metal and other services courtesy of the new level of online customer control and transparency. It also allows dealers to offer an opportunity to inform customers that the final pricing is based upon their circumstances with no dealer discretion.”
A heroic scramble
Tew added: “Clearly, the retail motor sector has undertaken a heroic scramble to move from their old model to the new norm of online-with-reserve-and-collect in a matter of weeks. These figures show the extent of that change. We believe that around one in four car, van and motorcycle buyers are now applying for finance online, which shows the speed of digitisation. Essentially, these customers have entirely chosen and financed their vehicle online. It’s a major shift.
“I’ve heard it suggested more than once that the coronavirus crisis has pushed forward the digitisation of the motor industry by five years, including motor retail, and that seems like a fair assessment to us. Certainly, we are seeing the creation of a large group of consumers who are becoming desensitised to the idea of buying a car entirely online in a manner that they wouldn’t previously have considered.
“Our view is that, once a vaccine or other advance is implemented, there will be some people who want to go back to buying a car in the showroom. However, for others, the change to thinking of car buying as an online activity will be permanent.
“Dealers who want to quickly digitise their businesses and catch up to those further along the process are prone to error – they are attempting to condense a purchasing process over which they would ordinarily take months into a matter of days.”
Since the start of 2020, iVendi has launched three new products – ENGAGE, CONVERT and TRANSACT - that together form a comprehensive online motor retail journey for vehicle retailers of all sizes.