Auto financing provides a case in point

By Kevin Deveau

Convenience plays a large role in how people make day-to-day decisions. The simpler the process the more likely consumers are to choose one product or service over another as it generally improves their overall customer experience, or CX. The decision about how to finance the lease or purchase of a vehicle is no different.

As consumer preferences change, companies need to understand how to reach them and how to optimize their interactions in order to provide them with the best experience possible. By recognizing the shifts in the buying preferences of their customers, organizations can target their outreach more effectively and provide them with the best CX. But how are consumers deciding to finance their vehicles today?

Given new innovations, such as driverless cars managed by artificial intelligence (AI) and a move to digital experiences, there is clearly a shift occurring in the vehicle industry. However, these changing preferences also apply to the financing portion of the CX.

There are several kinds of providers that customers can obtain a new loan through, like, but not limited to, banks, dealerships and credit unions. It’s up to the vehicle-selling/leasing and financing organizations to know whether all options are considered equally, if there are changes in the trends, the factors customers consider most important in their decisions and whether there are any gaps in how providers are meeting customer expectations.

Results from consumer survey
To get a clearer picture, FICO commissioned its second global survey on the consumer auto finance experience. In Canada, almost seven in ten (66%) of consumers applied for automotive financing directly at the dealership when they purchased their vehicles: more than any other participating country. Canadians seem to be most comfortable leaving auto financing to the perceived experts as 58% of respondents are also planning on using this method in the future.

The convenience of one-stop shopping, for purchases and leases and for maintenance and repairs that dealerships provide is also a major factor for Canadian consumers, with 46% of respondents recorded it as the reason dealerships were their top choice. This was followed by the expectation of promotions and discounts (42%) as another motive.

In addition, Canadian consumers are the most likely to only consider one financial lender before making their decision (70% versus 49% globally). Companies that gain a consumer’s attention and trust first are most likely the ones who will earn their business, potentially providing another advantage to dealerships

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. When customers are the ones to initiate the purchasing process (73%) the first option, and the easiest, would be the dealerships because of the convenience factor.

Dealerships currently have several favourable advantages over other providers. However, Canadians are also one of the top participating country consumers (27% versus 22% globally) who indicated they initiated the financing discussion to purchase or lease a vehicle because of an offer from a company. While the number is still relatively low, it shows that Canadians are responding to financing offers more than consumers in most other countries, only surpassed by those in Germany (29%).

In order to better compete, other providers will have to determine how to make their customer experience and offers more desirable to consumers in order to draw them away from dealerships. Opposingly, dealerships will have to ensure they are providing their customers with the best offers and service in order to keep them. So how can these providers determine the best CX with every consumer having slightly different needs? AI and data analytics.

The advantages of AI and data analytics
More and more service providers are competing on CX powered by data, advanced analytics and connected decisions. Consumers enjoy receiving promotions that are personalized to them. Target marketing works, but data analytics and AI are necessary for companies to identify the best offers for each individual. Analytic models can decipher data for each consumer and find the best offers for them to potentially initiate the financing discussion. This is the same idea that’s used by search engines to determine what ads are best to display on web pages based on previous searches people have made. Based on the current behaviours of customers, it’s more likely that the financing sources (e.g. banks, dealerships) will begin personalized discussions based on pre-purchase behaviour signals and proven credit-worthiness, so that only those engaged in the market for a new vehicle receive early offers.

There’s a large quantity of digitized data, from both actual vehicles and consumers’ financial histories, that organizations can leverage to improve the customers relationships and experience. Data points such as credit checks, any missed payments, number of kilometres driven, distances of each trip and when a car needs servicing can all be used to identify the best offers for customers.

Companies can learn a great deal about their customers through the use of data analytics and AI. They provide insight into their buying patterns and overall needs that might otherwise go unnoticed. Engaging with customers directly can also provide organizations with an understanding that isn’t in the numbers. Speaking directly to customers and using any additional information to increasingly personalize the original offers to them will also improve the relationship. The more you know about your customers, the more convenient you can make the process for them and the more likely they are to be a returning customer.

Kevin Deveau is vice president and managing director, FICO Canada.

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