Like all retailers, car dealers are moving towards a future where purchases can be fulfilled entirely online, but as the number of new cars bought on credit passes 85%, are dealers giving buyers enough access to finance on their websites?
Motor retailers are taking steps in that direction by investing in software to integrate finance calculators, credit checks and quotations into their website, while also making sure everything is presented in line with Financial Conduct Authority (FCA) rules and the Consumer Contracts Regulations.
James Tew, Ivendi managing director, said finance should be offered prominently on dealers’ websites, simply due to the level of vehicles funded this way in the UK.
He said: “One of the most important things is looking at the prominence given to finance on each listing online.
“If around 75% of all new cars are bought through finance and around 80% of used cars are bought through dealers on some sort of finance, shouldn’t the online finance option be the main feature when it comes to pricing next to that vehicle?”
Simon Dixon, founder of Rockar, the shopping centre-based dealer group that represents Hyundai and Jaguar, allows customers to complete their entire buying journey online if they wish.
Dixon said of the 60% of customers that buy online, 90% of those purchases are through finance.
He said while a high proportion of that 60% would have entered a physical store to speak with Rockar’s ‘angels’ (the company’s customer service advisers) they are left to go away and buy in their own time.
Dixon said Rockar spent a lot of time working on how payment options are displayed to customers: “We wanted there to be as much self-service as possible and think about what is frustrating about the buying process in the showroom.
“Listen to what customers are saying they want and add as many components from that buying process online to give them control.”
Tew said finance quotations need to be sophisticated enough to keep customers informed of the changing monthly payment price and the implications of different lenders, the part-exchange price and the terms of every step from A to Z.
Dixon said whatever is built has to follow the legal structure put in place by the FCA, but it needs to be as clear and intuitive as possible.
Once a customer has chosen a model on the Rockar website, customers are able to choose what sort of payment option they would like to take – PCP, conditional sale or cash. All options are presented in a large font and graphics are mobile-responsive. For a PCP deal, the deposit level, term and annual mileage are all adjustable on a slider button and the payment summary panel detailing each element updates automatically.
The customer can print out the quote at any point and there are links to detailed explanations on how PCP and conditional sale agreements work.
Rockar’s quotation system allows customers to save their progress at any point and return to their “shopping basket” to complete the process, either in-store or at home.
Shaun Harris, sales director of Codeweavers, said it can be useful for dealers to include video explainers on each finance product and it is “imperative” that offers work on mobile and tablet devices, as well as the desktop.
According to FCA regulations, a representative example must be shown “where a financial promotion indicates a rate of interest or an amount relating to the cost of credit, whether expressed as a sum of money or a proportion of a specified amount”.
Tew said this can be tricky for smartphones in particular, as a representative example is often quite long and customers have to scroll down to view it all.
He said: “The representative example can take up a lot of real estate and dealers need to make sure it is presented on mobile on a way that is easy to digest and makes everything clear.”
According to Tew, about 28% of customers quit the finance quotation process when it comes to entering their bank details at the affordability stage.
He said: “Customers don’t want a hard search on their details, due to it having a potential negative impact on their credit score.
“It is possible to offer a soft search or quotation search that will still give them an accurate decision on whether they would be accepted for finance, but it won’t affect their credit rating.”
Used cars and classifieds
Harris said dealers failing to offer finance for used cars listings would be guilty of a “serious oversight”.
“Displaying affordability options on listings will increase customer attention and interest that in turn will encourage them to seek further information about the car, the dealer and the finance offer,” he said.
Codeweavers’ research found that dealers with a finance lead-generation button on their stock listing page received six times more finance leads than those that display the finance button only after customers have clicked through to look at an individual vehicle.
Harris said: “When the customer wants to delve into more detail, an easy-to-use informative calculator with clear calls to action on the details page of a vehicle is becoming essential.”
Tew wants to see more work done online with search by payment for new and used cars.
Some dealers, and classified websites such as Motors.co.uk are already doing this, allowing customers to search for vehicles that sit within their monthly budget.
SEO and digital marketing
The Google pay-per-click advertising landscape is currently dominated by online finance brokers and big providers such as Lloyds Bank, the owner of Black Horse.
A quick search for “car finance” on Google brings up a host of brokers, but just one dealer group – Arnold Clark.
Karl Werner, chief executive of Motonovo’s motor finance division, said: “It’s clearly challenging for a single dealer to make a big difference against these competitors, but, by working together, the dealer community can make a difference.”
Motonovo has created a not-for-profit classified portal called findandfundmycar.com for dealers to compete with existing classifieds players and push to compete for rankings on Google.
Werner said: “Where the main market player promotes their own finance option prominently, in competition with their dealer customers, we believe that dealers should be promoting the affordability of their cars.”
Werner said dealers should not use “black hat” tactics, such as keyword stuffing, duplicate content and spam blogs to try and achieve better SEO rankings.
“Things that can be helpful are regularly updated and useful blogs, guides or finance news with keywords about finance with appropriate headlines and tags,” he said.
Werner said that until the early part of this year, the FCA’s focus for the motor industry was on authorisation, but this has turned to how dealers are implementing regulations.
Harris said: “Just because the fears associated with FCA regulation have yet to see any high-profile issues, it certainly does not mean there should be any let-up on the need for
compliance, especially in today’s digital market.”
Tew believes offering finance online already ticks a lot of boxes the FCA wants to see. This includes consumers’ ability to view likelihood of approval, ease of comparing products and the options and information open to them.
He said: “Affordability is a big thing with the FCA and I think viewing finance quotations online at your own pace with all the options and variables available to you is what regulators want to see.
“The dealership is the domain of the dealer. Online can only be good from a customer’s point of view. It’s a neutral environment.”
Harris said dealers should look to invest in good controls and processes to make sure they are compliant online and this can often be helped with tools offers by third parties or their funding providers. The way finance is offered online should be checked by a compliance expert.
He also suggested it can be good to go above and beyond what the FCA requires, including ‘plain English’ explanation guides on each area of finance offered online to help customers be as informed as possible.
Regulation on the horizon
From April 26, 2017, the FCA will publish complaints data from the finance industry, including dealers.
Tew said this will be the next big test of how the FCA is viewing how dealerships are dealing with regulations.
He said: “I don’t want to be a scaremonger, but I think many will be waiting to see what comes of that report. With that, we will see how dealers have been documenting their processes and the sort of complaints coming in from customers in the showroom and online.”
Werner said dealers should also be aware of the new General Data Protection Regulation (GDPR), which is likely to affect how all businesses use customer data.
He said: “Inevitably, this has implications for finance. They may not be due for implementation until 2018, but preparations for change are being recommended by trade bodies.
“The importance of good data-marketing practices [was] highlighted in September when Carfinance247 was fined £30,000 by the Information Commissioner’s Office as a result of a marketing campaign that involved sending 65,000 nuisance texts.”
Harris is hoping for the FCA to publish more clarity around the use of representative examples in the digital space to help with “inconsistencies with interpretation and presentation”.
He said: “The FCA has consulted on whether the current regulations are right for the digital arena, so there may be movement in time.
“However, as long as dealers are open, transparent, informative and treating customers fairly, preferably from what is often the first point of interaction, the dealer’s website, then I don’t think they have anything to fear.”
Dealers should be aware, according to Harris, that overt financial promotions through social media can be a complicated area fraught with pitfalls.
The FCA considers tweets and LinkedIn and Facebook posts to be ‘non-real time communications’.
This means any communication on social media is treated the same way as a promotion in a magazine or in an email campaign, with the same compliance checks in place.
All social media-based financial promotions must comply with FCA rules and be “clear, fair and not misleading”.
This is also the case when tweets on Twitter are used to link through to a website – the ‘click-through approach’. Social media is not exempt from the need to show a representative example.
Tew said: “If you look at something like Twitter that has just a 140-character limit, you wouldn’t be able to fit in a representative example of a finance offer in there.
“I think there has been some disconnect with dealers’ marketing teams with what they can advertise on social media. It would be prudent for any marketing messages to be put through a compliance expert before they go out on social media.”
Specifically, the FCA regulations require dealers to keep a record of the communication. Best practice advice suggests this should be beyond any records held on the social media platform itself.
The FCA understands the potential value to consumers of social media, but requires compliance with regulations to be observed. As the FCA’s most recent social media guidance observes, dealers must “have the systems and controls in place to deliver this”.
Harris said: “However, this should not stop a dealer leveraging the wider power of social media.
“Creating interesting content and encouraging customer interaction should be encouraged, but be sensitive around the finance ad insurance arena. It’s all about being talked about for the right reasons.”