The way we buy cars has changed significantly over the last year. With the pandemic shutting down showrooms, both sellers and consumers have moved online.
The sale of new cars in the UK dropped by 30% in 2020. However, the sale of electric vehicles increased by 185% during the same period, and companies such as Snows Motor Group saw their year-on-year web traffic rise by 27%.
In a year full of uncertainty and economic challenges, customers moved towards a subscription model of car ownership where they pay monthly for their cars and go online for sales and aftersales activity.
The shift to online
Last year saw the automotive industry accelerate into the digital age. The old system of spending many hours in a car dealership, negotiating on price, handling finance and insurance, and having to pick up the car in person, has now been replaced with a simpler solution.
All the laborious tasks involved with buying a car can now be done online and in the comfort of your own home. According to Google, 95% of vehicle buyers now use digital as a source of information
For example, the Ford Mach-E can only be purchased online and Mercedes Benz has introduced an online showroom designed to simplify the purchasing process.With the proliferation of home deliveries, consumers can research, purchase, and receive their vehicles without once leaving their homes.
Alternatively, consumers also have the option to do all the sales paperwork online and then pick up their car at the dealership using ‘click and collect.' Today, 72% of car buyers do not feel the need to finance a car in person. As such, when the pandemic first hit, and dealerships were forced to close, manufacturers upgraded their online offering to allow customers to manage the sales process online.
Gone are the days of trawling through local ads and second-hand dealerships to find the right car. Instead, we now have websites like Cazoo and Cinch, where people can buy a second-hand car online and have it delivered to their front door.
Changing consumer habits
The concept of car ownership has changed significantly over the decades. First, there was a shift from ownership to hire purchase. Then, there was a move to leasing a car – no ownership involved. Now, there’s a boom in subscriptions. In recent years, we have seen some companies offering car subscriptions, but car manufacturers are now doing the same.
Like many Brits, I too have adopted this subscription model with my latest car purchase. My monthly subscription includes roadside assistance, Volvo on Call, as well as service and maintenance. So, although I’m paying a premium, the benefits and flexibility I get make it worth the cost.
The appeal of subscriptions is that it’s all done online. Just like my Spotify or, better still, my Beauty Pie membership, I select the package I want, the extras, confirm my monthly payment,and a month later I get my car delivered in the same way as my skincare.
Manufacturers adopt the subscription model
The benefits of a subscription service extend beyond consumers to manufacturers. The model provides them with a direct relationship with their customers. It gives manufacturers greater customer insights as they can better track consumer habits, the extra features they are interested in, and the car qualities to which they are drawn. This is a sector poised for growth. The global market valuation for car subscription services is projected to cross £35bn by 2026.
Subscriptions are also much easier to manage, especially when those payments are made on a card. Features like Account Updater ensure that expired or changed card details are automatically updated. As a consequence, the customer doesn’t need to re-enter their information and the seller doesn’t miss out on a payment. This shift to network tokenisation should eliminate the problem of missing or late subscription payments.
In addition, by using the right technology and payment partner, manufacturers can simplify a lot of their backend processes. For example, they are able to split the monthly payment transactions within departments internally -the dealer, the service and maintenance department, etc.
Role of technology
Technology has enabled the modernisation of car purchasing. And as technology constantly evolves, so too will the way we own cars. We’ve seen a boom in interest from car manufacturers looking to enhance and develop their apps.
The Mercedes Benz app, for instance, allows customers to book in a service, pay for parking, and order extras. The app acts as a wallet for all things car-related. To stay ahead of the curve and provide the most innovative and easy-to-use car payment services, manufacturers must adopt all-in-one payment solutions that can support online sales, subscriptions, and marketplaces, via a virtual terminal.
The Payments industry is getting more sophisticated, and consumers want a fast and easy online experience, so it is important that car manufacturers are offering the best solutions to customers.