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A joint publication
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Dealers Lenders
• Increase conversion rates • Increase likelihood of selection by dealer for
• Decrease negotiation time/minimize future transactions
staff time required per transaction • Increase opportunities for cross-selling
• Increase customer loyalty, leading to • Decrease likelihood of refinancing
service business and repeat sales • Leasing customer loyalty for captive lenders
• Decrease dealer overhead by • Potential transition to direct channel for
cutting time spent on finance future purchases
This paper focuses on indirect lending because of the The remainder of this paper will cover:
increased complexities driven by the dealer model and
the need to support omni-channel interactions, including • How customers would like to see the auto financing
in-person transactions at the dealership. However, many process change
of the same considerations, particularly around the • Drivers of consumers’ desired experience, including
benefits of digital solutions, are also applicable to direct “purchase scenarios” and “borrower personas”
lenders.
• An overview of a potential future-state experience
Read on to find out more about what your customers are intended to align to customers’ new expectations
looking for, and how dealers and lenders can become • A roadmap for both dealers and lenders to follow to
leaders driving the future of auto finance. enhance their experience
5
“I don’t want to sit in the office for hours.”
1Focus groups were conducted with approximately 30 consumers who purchased and financed a vehicle within the past 12 months, in small groups of 2-4 participants.
Findings may not be representative of the larger consumer population but are referenced throughout to provide color on consumer opinions regarding specific
practices. Additionally, in-depth interviews were conducted with three dealerships currently undergoing pilots using AutoFi’s solution, including one online and two
brick-and-mortar dealerships.
The auto finance process should be designed to help get Here’s an example: The discussion with F&I usually takes
customers in the right vehicle at the right price, with a place after the customer believes the monthly payment
financing structure that they can afford. Today’s process, has been set, thereby causing confusion. After-market
which was largely developed in an era before many of products may be beneficial to the customer but can
today’s technological advances were available, may not increase the monthly payment, which can catch the
always be fully optimized to achieve these goals. While customer off guard.
details vary by lender and by dealer, some common
From reducing “decision fatigue” at the end of a long day
themes emerged from our analysis. Many consumers find
at the dealer to offering better tools to help answer key
the current process too rigid and sequential—it provides
questions about financing options, consumers are
the customer little control, and in many cases has not
looking for changes that make financing more accessible
evolved to meet their new experience expectations.
and user-friendly.
Initial interest
1 and consideration
As customers start to research vehicles, they
likely haven’t even started to consider 2
financing … other than maybe to check if they Research and
can afford an estimated monthly payment. evaluation
Preliminary purchase
decision
After the customer has Preliminary
3 decided on a car, the
question of affordability
financing
decision
4
continues to loom.
The financing process can be more Borrowers may not fully understand
complex than borrowers expect their financing structure
• Many borrowers are surprised that a transaction they • Today’s process frequently emphasizes the monthly
view as “simple” is so complicated and time- payment as the primary focus of financing
consuming. negotiations, so customers may have limited
• Borrowers are often caught unprepared by specific understanding of the terms of their loan and their
requirements such as proof of income or proof of impact on the total cost of financing.
insurance—and these requirements can cause • Trade-ins may cause confusion, as consumers may not
significant delays and negative experiences, especially get the value they expected and may not understand
when they’re paper-based. the impact of negative equity.
• Borrowers often face “decision fatigue,” since the F&I • Leases present unique challenges due to limited
process typically isn’t started until customers are borrower understanding of lease terminology and
already drained from selecting a vehicle and calculations, and complicated decisions such as
negotiating price—and already eager to get their new mileage allowances.
car out on the road.
• As a result, borrowers may not take the time to fully
understand how add-on products can benefit them.
• Borrowers may feel like “extra costs” are being sprung • Borrowers are typically presented with only a single
on them at the last minute after they’ve already agreed financing offer and are not aware of how the decision
on the price of the car if they were not coached on the was reached or what factors affected their pricing.
F&I process along the way. • While some borrowers are beginning to comparison
• Consumers may feel pressured to sign paperwork right shop even at the point of sale (e.g., on their mobile
away to make sure they get the vehicle they want. device while at the salesperson’s desk), many don’t
• Consumers may face a higher risk of unexpected know where to turn with questions .
changes if they take possession of the vehicle with a • Many borrowers still don’t feel they have the
contingent contract/before financing is fully approved. information they need, so comparison shopping will
likely continue to increase as more information
becomes available and consumers educate themselves.
Trade-ins Very difficult to get over the hurdle of I had gotten an offer from the dealer
negotiating the trade-in. that I thought was low. I actually took
the trade-in to [another dealer group]
and did their free appraisal process.
In-person And then you just sit and have to wait It was kind of the painful paper process.
negotiations for a salesperson for a long time. So that Very traditional. It did not leverage
was frustrating. technology at all.
It took longer than I anticipated to sit The back and forth with his manager
down through all of the paperwork. on settling the terms just took way
too long.
F&I process Even though I made it pretty clear that I So I just kept saying no, no, no. He was
don’t want to buy the prepaid just doing his job, but that’s really the
maintenance package or any extended frustration of going—having to sit in
warranties, he still went through the the F&I office.
laundry list of additional things that he
could offer me.
Final paperwork I felt rushed to sign all the documents I did a lot of signatures and I was left
and really didn’t have time to think with a nice [company name] folder
through what I was signing. stuffed with paper as my parting gift.
Our focus group participants identified opportunities to enhance the financing process from start to finish. Reviewing
your customers’ feedback and complaints can help identify targeted areas for enhancements based on your own
specific operations. It’s critical to review feedback in the context of how financing fits into your overall purchase
experience—and to understand how your incentives and operational structures are driving certain behaviors.
One reality of auto finance is that most consumers view By focusing on the following areas, dealers and lenders
the product as a means to an end. Consumers don’t see can redesign their indirect lending process to more
themselves as shopping for an auto loan or lease—they effectively support the overall car-buying experience and
think they are shopping for a vehicle and simply view the better meet the needs of customers. This will not only
loan or lease as the method of payment. While this vastly improve customer satisfaction, but also minimize drop-
oversimplifies the nuances of auto finance, it’s important out, as customers’ sources of frustration are eliminated
to consider this mindset when designing an optimized and they opt to continue further through the sales and
financing experience. You need to minimize friction and origination funnel.
make financing feel like an easy “check out” experience.
A negative customer experience is clearly bad in and of itself, but it’s important to recognize that these negative
experiences also have both short-term and long-term ramifications for the business and its bottom line. From
increased operational and regulatory risk to potential loss of revenue and future business, there are many incentives
for dealers and lenders to improve their customer experience.
Poor customer
satisfaction index Elevated risk of default
scores Many customers appear to base their loan or lease
decision on limited information without full
Dealers that score poorly on CSI understanding of the actual terms and structure of the
may find that manufacturers and financing. As a result, they may not be prepared to
lending partners are less willing make their payments, and may commit to financing
to work with them, or treat them they can’t afford.
as lower priority partners.
Does it feel like your business is stuck spinning in circles? You’re not alone.
How to
break the
cycle of “I don’t
today’s think I
status can solve
quo? this
alone.”
Indirect auto finance presents a challenging environment for innovation because of the complex relationships
between lenders and dealers. At the same time, customers have not fully taken matters into their own hands to
improve their own experience or drive change.
• Dealers typically work with multiple lenders, so • Many consumers find the car-buying process
they are unable to offer new capabilities unless confusing. This can make the overall purchase
multiple partners can support them. experience overwhelming, and this anxiety transfers
into the financing process.
• Lenders have to accommodate large networks of
dealers with different levels of sophistication. • One dealer we interviewed indicated that only 50%
of customers try to negotiate.
• Dealers are the primary owners of customer
interaction, but many are fragmented and • Most borrowers fail to take simple steps like
lack sufficient budgets to invest in technology obtaining pre-approvals or checking trade-in values
infrastructure. in advance. Many aren’t even aware of available
resources.
• Lenders and dealers may also be dependent on
integrations with technology service providers • Auto finance has not yet reached a tipping point
and other participants in the auto finance where consumers have “voted with their wallets” to
ecosystem. demand a better process, but that point may be
approaching as digitally-enabled alternatives
become available.
The clearest takeaway from our research was that there is a wide variety in how consumers wish to interact with their
dealer and lender throughout the car purchase and financing experience, and what role they expect the two entities to
play. Our research indicates that there are two primary sets of factors affecting borrowers expectations from their
auto finance experience:
• Their personal characteristics and personality, as represented by a “borrower persona.”
• The trigger that causes the borrower to need to purchase the vehicle, or their “purchase scenario.”
Accident or emergency
Aging vehicle/ Each customer’s
standard expectations are unique.
replacement Put your customers in
Life event control and empower
them to make the
Financial/ experience their own.
savings milestone
1 http://www.pwc.com/us/en/consumer-finance/assets/pwc-consumer-lending-radar.pdf
Our research identified significant variance in consumers’ desired experience across many different dimensions. With
this broad range of expectations to address, technology alone won’t cut it. Your salespeople still matter, and they’re
key to building effective customer relationships by leveraging digital tools.
While further analysis is required to fully understand the impacts of borrower characteristics on auto financing
mentality and behavior, the following illustrative borrower personas are meant to represent some of the areas where
your financing process should be flexible enough to accommodate a broad range of customer approaches.
Car guys/gals and gearheads I don’t care how it works, just fix it
Some borrowers are extremely knowledgeable (and passionate!) about cars. Others just think of it as a means for
transportation and don’t care about all of the specs.
Impacts: Provide options for customer education and add-on product sales approaches.
I picked you because you’re the best … because you’re the closest
Some borrowers just want to get as good of a deal as they can at their local dealer, while others will shop around
and explore every option.
Impacts: Understand what level of information your customers need to make their decision.
• Online pre-approvals
Select focus group comments1 • Mobile applications
• e-contracting
“They didn’t actually require a lot from me to • Intuitive user interfaces with gauges and sliders to see
get the loan approval. They already had most the impacts of financing changes
of your information on file, so it’s literally 10
or 12 questions on what you want.” • Direct integration with lending partners, especially
captives
Recognition that a better experience is possible has led a number of dealers to implement new capabilities and look
into partnership opportunities with lenders and technology providers that can help integrate financing into their
overall digital experiences and streamline their financing process.
One of the dealers we spoke with highlighted that customers are coming into the dealership more educated than ever
before, and in many cases may even know more about certain topics than the sales staff. Innovative dealers recognize
that as the tools available to consumers continue to improve, they will need to be prepared to support a new customer
engagement model—one based not on an information asymmetry, but on a mutually beneficial transaction that
provides a high level of customer value.
1Statements from focus groups have been lightly edited for space and clarity.
One overall
process … two
very different
Illustrative customer experience borrowers …
Borrower A Borrower B
modules both satisfied.
Borrower A is
Payment budget-constrained
and wants to fully
understand what
Finance research vehicle he can
afford. He takes
and selection
advantage of
educational tools
up-front, looks at
Vehicle pricing financing options to
determine which
vehicles fit his
budget, and then
Vehicle research revisits financing
and selection after selecting a
vehicle to make sure
he got the best deal.
Loan account
setup Borrower B knows
what she is looking
for and that she can
afford it. She
Transaction quickly selects a
structure vehicle and handles
negotiations for
both the vehicle and
Borrower her financing
simultaneously to
education find the lowest total
cost option. Her
goal is to get a
Initial great deal and get
consideration back on the road …
fast.
$
$
$
$ $ • Customer-owned
process
$
$ $ $ $
A personal touch …
All of the dealers we spoke with said they believe the
quality of their salespeople still matters, and will continue
to matter, even as the financing process becomes more
automated and increasingly moves online.
Salespeople can play a key role in relationship-building and
in supplementing available tools to provide borrower
education. We recommend that dealers provide their sales
staff with the tools and support necessary to maximize the
effectiveness of these key resources:
Ancillary features
• Vehicle service reminders
• Budgeting and personal financial management tools
• Gamification to drive engagement
1 http://www.pwc.com/us/en/consumer-finance/assets/pwc-consumer-lending-radar.pdf
Innovation will require partnership and effective collaboration between dealers, lenders, and
other ecosystem participants, such as technology providers
Dealer Lender
roadmap roadmap
• Clearly outline expectations for lender • Determine what capabilities you want
partners or find an aggregator partner to to offer to your customers—and which
help manage those expectations. you can own yourself versus which are
• Enhance your own digital capabilities, dependent upon dealers.
and make it easy for lenders to integrate • Include large dealer groups as partners
with you. in co-creation. Captive lenders in
- Build financing into your online particular may have unique
shopping experience. collaboration opportunities with OEMs.
- Offer standard application program • Identify technology service providers
interfaces (APIs) to connect into your that work with multiple dealers, and
process. partner with them to build
integration capabilities.
• Determine your strategy for lenders that
don’t have digital capabilities. Consider • Consider the full end-to-end process,
under which scenarios you use them, and including post-purchase account
how you can continue to offer a positive onboarding. Your job isn’t over when
borrower experience the customer gets the keys.
PwC AutoFi
Roberto Hernandez, Principal Kevin Singerman
M: (940) 367-2386 CEO and Co-Founder
roberto.g.hernandez@pwc.com M: (917) 655-0729
kevin@autofi.com
linkedin.com/in/robertohernandez1
@RobertoGHern
@METouhey
About AutoFi
AutoFi is the first point-of-sale financing product for automobile e-commerce. AutoFi’s software connects a
network of lenders, OEMs, auto dealers, and online marketplaces, providing a seamless plug-and-play financing
solution to existing online auto platforms, powering the purchase from application to closing.
To learn more: autofi.com
©2016 PwC. All rights reserved. PwC refers to the US member firm or one of its Additional thanks to focus group participants
subsidiaries or affiliates, and may sometimes refer to the PwC network. Each and the following contributors from PwC:
member firm is a separate legal entity. Please see www.pwc.com/structure for Jacquelyn Studdert, Kevin Gonzalez, and
further details. This content is for general information purposes only, and should Charles Bruen.
not be used as a substitute for consultation with professional advisors.