The future of buying cars is no longer the future
“Personalised solutions are what car buyers are looking for in the purchasing process nowadays,” according to Chris de Kock, the CEO of WesBank, the leading vehicle and asset finance house in South Africa. He was delivering the opening address at the first Business-of-the-Year roadshow staged at the Kyalami Conference Centre recently, under the auspices of NADA and Sewells-MSX International.
“The future of buying cars is no longer the future. It is now!” stressed De Kock.
He explained that the time-old linear process starting with Search (for a new car), then Sell (your trade in car), and lastly Finance (your new car) is no longer relevant, saying that it is inefficient, does not offer a personalised experience and is expensive.
“Only about 10% of the people who start this process actually end up buying a new car. Firstly, an average of about 30% are not in the positon to settle the outstanding balance on their present car, while only about 40% get approved finance resulting in the only about 10% of the potential customers actually doing the deal,” added De Kock.
The recent amendment to the National Credit Act stipulates what credit providers can accept in terms of affordability rules leaving very little latitude for those customers who do not have sufficient disposable income to take on additional debt – hence the high declination rate.
Most buyers nowadays opt for a repayment period of 72 months, with more than 30% of these transactions involving one-time balloon payments. The negative effect of this kind of debt structure is that the point at which the outstanding balance meets with the potential value of the vehicle (trade-in), happens only from year four whereas most SA consumers prefer to purchase a new car on three-year cycles – hence many are turned away or forced to pay in large shortfalls.
However, the focus at WesBank – and hopefully at the motor retail business countrywide – is very much on the changing consumer buying patterns in South Africa.
The WesBank CEO says that his company generally follows trends in the United Kingdom as they usually migrate to South Africa.
One of the trends becoming stronger in the UK is that people are looking more at “using” cars rather than “owning” them. Younger people are also no longer car mad, with the number of under 25-year-olds buying a new car now being 30% lower than 15 years ago, while 20% fewer 18-year-olds have a driver’s licence compared to the situation in the 1960’s and ‘70’s.
De Kock explained that potential car buyers were no longer researching only cars on the internet, but were also using this medium to look for financial and insurance packages. Often, they had worked out how much they could afford in payments before they looked at the cars they considered buying. More than 75% of potential buyers do intensive internet searching on finance. Only then did many of these people actually go to a dealer.
Social media plays a major role in decision making when buying a car, with 87% of potential buyers saying that they had already researched their potential purchase on social media sites before going to a dealer.
“We need to catch up to stay relevant.” This was De Kock’s rallying call.
“Dealers will still be important because most customers want to experience their new car before buying it. They also want expert advice on options for the car as well as answers concerning insurance and finance queries. They still yearn for the personal aspect in the buying process. What is interesting is that the number of motor dealers in the UK is growing, not declining, as the car-buying landscape changes.”
Three other well qualified speakers added to the information flow at this very impressive and important roadshow.
Katy Perry, of Seriti Technology systems, provided several interesting inputs on the current environment in the local, automotive Finance and Insurance (F&I) world. She said the most notable recent trend was the strong swing over the past two years to dealers selling more used than new cars.
Ms Perry also took the opportunity to spell out some of the big changes coming to the F&I environment in 2017 in the form of new compliance requirements by the Financial Services Board. These include compulsory annual training.
Wayne de Nobrega, the CEO of Tracker, referred to the “Internet of Me” as the driver of the personalised customer experience.
He added that his company gets 4-million pieces of data each day from the multitude of vehicles it monitors. This data is ideal for targeted communication with the drivers and owners, provided the necessary approvals have been obtained.
He ended his presentation by challenging all companies to actively relook their business processes and relationships to see where changes can be made to meet the requirements of today’s customers.
The final speaker was Scott Gibson, the Group Executive, Digital Practice at Dimension Data.
He continued in a similar vein, reiterating the challenge to companies about how they are responding to digital disruption. For starters, he said companies must not be encumbered by traditional organisational structures. “It was now time to think out of the box and set up flatter structures which could react quickly to changes.”
He used a quote from Mary Barra, the CEO, and Chairperson of General Motors, to stress how quickly change was coming to the automotive industry: “Barra said recently that the global automotive industry will change more in the next 5-10 years than in the previous 50 years.”
“It is a case of switching from business as usual to business unusual,” commented Gibson.
The messages from all the speakers carried a similar message – adapt to change quickly and keep your eyes open for new business opportunities that are coming.