This year’s cost-of-living crisis presents significant challenges for UK consumers.
However, it is also a time when the automotive aftermarket can deepen its connection with customers, and engender trust by offering innovative payment options that lift the financial pressure a little.
That is the view of automotive finance provider, Bumper, which says customers are looking for ways to reduce spending at the moment, and the emergence of new digital payment systems means that franchise dealerships can capture a greater share of the market.
Furthermore, consumers are keeping hold of their cars to save money, which in addition to disruption of the new car supply chain, is pushing up used car values.
People are also postponing vehicle repairs, or choosing cheaper lower-quality options, offering the opportunity for aftersales businesses to service older vehicles likely to require more repairs on a consistent basis.
Challenges in the automotive aftersales market 2023
The cost-of-living crisis is heavily influencing car-buying decisions, with people shying away from larger purchases. So significant is this financial crisis that car repairs and servicing are being postponed due to a lack of cash.
Although the growth of EVs means fewer service visits for drivers, the repairs can be more expensive. Dealers are also likely to want to retain petrol and diesel-powered vehicles for as long as possible due to servicing revenues.
As the cost of living continues to soar, the following statistics reveal the severity of the situation for UK consumers:
- The Consumer Prices Index (CPI) increased by 8.7 per cent in the 12 months to April 2023, further compromising consumers’ ability to meet their financial obligations.
- Market research company, DJS Research, report that 13 per cnet of the 1,017 in-market buyers surveyed were thinking of carrying out their own car repairs and maintenance in order to save money.
- The prices of food and drink (non-alcoholic) increased at the second highest rate in 45 years, in 12 months to April 2023. Food inflation measures the cost of food items and is a key indicator of the financial pressure consumers may be under.
- Another key statistic and non-negotiable outgoing for many people is the cost of fuel. Initially affected by the war in Ukraine, fuel prices have lowered a little in the UK, as of May 21, 2023, stood at 143.97p for petrol and 150.8p for diesel.
Where does this leave the automotive aftermarket in 2023?
In summary, people are:
- Cutting down on their spending, particularly on larger purchases
- Struggling to pay priority bills, such as mortgage/rent, utilities, and council tax
- Keeping their cars longer, when otherwise they might have bought a new car
- Delaying vital car repairs, which without the cost-of-living crisis, would have been carried out routinely
- Maintaining their own cars to save money
Fortunately, it is not all bad news. New digital payment methods are emerging and are rapidly being adopted by the UK auto aftermarket – helping to ease the financial pressures on necessary consumer spending.
In fact, Buy Now, Pay Later (BNPL) is a key financial product during tough financial times. According to the comparison website, Finder, over 17 million UK consumers have used BNPL services as of 2022.
So how can dealerships and the aftersales market use this and other emerging digital payment systems to their advantage? How can dealerships capitalise on rising digital trends?
New digital payment technologies provide flexibility, control, and security to customers. Good communication is key, however, if aftermarket businesses are to capitalise on these advancing payment systems.
Actively promoting open banking facilities and other innovative payment solutions, such as Buy Now, Pay Later, is vital to attract a new demographic, retain existing custom, and consolidate order books for the future.
Open Banking provides an opportunity for automotive businesses to stand out from the crowd. It enables customers to make vehicle and aftersales purchases directly from their bank account.
This removes the involvement of third-party credit card and debit card companies and saves merchants the considerable cost of using their machinery and service. A further key benefit of Open Banking is the speed of payment, with the merchant receiving funds within seconds.
Buy Now, Pay Later in particular is a significant payment system in this cost-of-living crisis, which dealerships, independent garages, and service centres, can also benefit from. In fact, Buy Now, Pay Later solves a multitude of problems.
So what are the benefits of new digital payment systems and BNPL for merchants and consumers? Here are just a few…
- Merchants offering digital payments and BNPL present themselves as agile, modern businesses that place customers at their heart
- Increase average invoice value by converting more urgent and advisory work
- Increased customer satisfaction, leading to repeat business
- Reduces the need to discount work which reduces margins, erodes the value proposition of the franchised dealer, but also sets a precedent for discounts on repeat purchases, reducing the lifetime value of customers
- The danger posed by fraudulent credit card and debit card usage is reduced and thus lowers the risk of liability for dealerships
- Customers can spread the cost of car repairs and servicing – a vital benefit when finances are stretched
- Buy Now, Pay Later and other digital payments offer speed and convenience to customers
- With biometrics now a mainstream identification system on mobile phones, open banking and Buy Now, Pay later are secure payment options that lower the likelihood of fraud
- Buy Now, Pay later reduces the stress of an unexpected bill
- It increases customer satisfaction with the experience
The global pandemic has accelerated the move towards digital payment in the automotive industry and aftersales sector. In fact, Bumper expects open banking to be the main method of payment used by car dealerships by 2030.
What is Bumper?
Bumper is an automotive focused digital payment platform that offers ‘PayLater’, ‘PayNow’ and open banking. It leverages proprietary AI-powered technology that facilitates real-time lending decisions. The solution enhances the conversion of aftersales revenue opportunities, reduces the need to discount, and increases repeat custom.
Bumper have featured in the Financial Times Top 1,000 fastest growing companies in Europe for the 3rd year in a row and are backed by Porsche Ventures, Jaguar Land Rover – InMotion, AutoTech Ventures, Revo Capital, and Itochu to help support their expansion across the European automotive sector.
For more information on how Bumper can improve the performance of your dealership, click here.