As recently as a decade ago, car finance was nowhere near as popular as it is now. Many people ruled out car financing as an option; but, since then, we have witnessed a dramatic shift in public opinion. These days, financing a new car is commonplace, and data analytics and new technologies are also playing a big role. And, above all, users’ mobility and car ownership habits are changing significantly.
Currently, there is a new revolution occurring in the car finance sector, and in this article we’re going to tell you all about it.
How do connected cars affect the relationship between financial institutions and dealers?
The harnessing of connected car data by financial institutions has the potential to become an excellent catalyst for engagement between the end user and the dealer. This will virtually guarantee the creation of business between them, thus justifying a financial institution’s decision to choose to offer connected car services over others, as the potential revenues will be higher with the former.
By way of an example, we estimate that an end user’s average garage bill is around 300 euros, and that they will take their car to the garage at least twice a year. If we can convince the end user to take the car to a workshop that we have an agreement with, then these visits will generate as much, or even more, profit for the dealer than the sale of the vehicle itself.
Connected car tools such as Drivus, developed by Net4Things, allow dealers and financial institutions to open up communication channels with end users, making it easier for the vehicle to be taken to selected workshops, thus multiplying the benefit with an excellent after-sales service.
The harnessing of data, as well as the real-time communication between the vehicle and the dealer, is completely transformed by having the right tools to facilitate this business model. Today, Drivus customers select their preferred workshop, which receives real-time information on the vehicle’s status, faults, and breakdowns, thus enabling excellent service and creating a close link between the customer and the dealer.
The source of big data
We now have connected cars that can store and communicate data to stakeholders without any human intervention. One innovation in the field of the connected car sector, as we have just mentioned, is Drivus. This is a small device that comes with a dedicated smartphone app. Once this device is connected to the car, it will gather information such as the current speed of the car, the optimal route to get to its destination, and the real-time location of the vehicle.
But why should someone sign-up for this service? Well, there are certainly a few advantages. First of all, this device can work as your digital assistant for both you and your vehicle. In the case of an accident, it will immediately activate a security protocol requesting help.
There are other similar services on the market, such as the Movistar car service in Spain. Another great benefit of using such a service is that it turns your analogue car into a connected car. Once you have it inside your car, you can enjoy wi-fi on the go.
Car finance – from an option to a necessity
From paying for cars by cash to opting for car financing, and even the current trend of not owning a car at all, in this part of the blog, we’ll cover how the car finance sector has changed in Spain.
One major reason for getting car finance is that you don’t have to put all your available cash into buying a car. Also, just like any digital gadget, such as your iPhone, cars get obsolete. New models come out every month. And, as soon as they do, the resale value of your car drops significantly.
According to a report by Edmunds, by the time a car hits its fifth year, that new car will lose around 60% of its value.. You can only imagine the insignificant sum people would bid for your car! Another great insight into the car financing industry is that luxury cars lose their value more drastically than mass-produced ones. According to an estimate, a luxury car loses its value by 20%-30% in its first year.
So, you can clearly see how the industry has changed over the years. And, just like any other industry, it will never stop evolving.
If you are a car financing company, then understanding your customers can give you a great competitive edge. When you get to know your customers, their lifestyle, and their purchasing power, then you can customize your financing schemes accordingly.
Up until the last decade, car financiers didn’t consider the needs of young adults. If an 18-year-old went to them and applied for car financing, they wouldn’t even read the application. But now companies are starting to understand that there is definitely a new market segment comprising mainly of young people.
A competitive edge in the car finance industry
How do you get this competitive edge? Well, data will help auditors analyze a person’s mobility needs, check up on their regular fuel usage, and so on. Once a bank has such data, they can customize their car finance schemes to fit the specific needs of that person.
Data from connected cars can be used to rate applicants. Furthermore, companies can use this information to offer new finance deals to their customers, or to increase the premium rate based on those scores.
The outcome of this customized approach to customer service is loyalty. When a customer sees that you are putting in the time to understand their needs and offer schemes that are tailored to them, they will think twice before switching to your rival.
Mobility data for car dealerships
After car financing, we have car dealerships. These are important for one specific reason – selling cars at the correct retail level. All the popular car manufacturers create car dealerships. If you talked to managers from any automobile company, you would learn how important dealerships are for their business.
Given the influx of data all around us, car dealers are now figuring out ways to use data to increase sales and customize their services.
Predictive analysis for car defects
A major part of a dealer’s responsibility is to repair, or replace, defects in the cars they sell. From regular maintenance to parts replacement – a dealer needs to take care of it all.
But it isn’t wise for a dealer to stay in the dark when it comes to detecting car defects. Dealers should always anticipate a certain number of recalls, as well as warranty claims. And this is where big data comes into play.
As we have seen above, big data is important for a variety of reasons. From increasing overall sales, identifying the right target market at the right time, and consolidating a strong online presence, to building a loyal consumer base that will refer you to their friends and family. If you own a car dealership and are wondering how you can leverage big data, here is a quick tip for you. Always start with data collection. List down all the viable sources of data that you can use. When you have this data, it will get easier for you to run different tests on them. Alternatively, you can also hire third parties to do the calculations for you.