A key gap in the online car-shopping shopping process — digital credit applications and approvals — appears to be closing, answering the demands of Canadian dealers seeking to satisfy what they see as a growing appetite for completely virtual transactions.
Mitsubishi Motors of Canada and Scotiabank are bolstering their online offerings by accepting digital credit applications — moves designed to increase customers’ ability to browse, finance and purchase cars online.
The changes come as a recent, national survey found that while dealers expect strong consumer demand for online car purchases, support for the financial processes is lacking.
J.D. Power Canada’s 2021 Dealership Financing Satisfaction Survey found that 49 per cent of dealers saw an increase in online sales in the past year, and 41 per cent expect at least one in five sales to take place online. But only one-third of non captive lenders — such as banks and credit unions — and only 15 per cent of captive lenders offer online applications and approvals.
“COVID created a need, but that channel [to allow customers to apply for car loans] is almost nonexistent,” said Patrick Roosenberg, director of automotive finance at J.D. Power Canada. “This is a channel customers want to use; it’s not going to go away.”
‘WE KNEW THIS WAS COMING’
The trend toward online buying was accelerated by the pandemic but was under way before COVID-19 and will outlast it, Roosenberg said. “We have an entire generation whose whole lives have been digital,” he said. “Why would [lenders] not want to create these channels?”
At the behest of automakers and dealers, Scotiabank in March of 2021 launched Auto Hub, a service to facilitate digital credit applications for dealers and is set to begin accepting electronic contracts in September.
Mitsubishi Motors of Canada began planning an upgraded online experience in 2019 when Google’s annual Think Auto study suggested that 43 per cent of buyers were likely or very likely to buy online. Yet the study found only two per cent of sales were completed entirely online, said Steve Carter, Mitsubishi Canada’s director of marketing.
From that realization, ClickShop was launched in March.
The “digital showroom” offers onestop shopping for Mitsubishi vehicles, from the traditional build-and-price right through to finding inventory at nearby dealerships, appraising trade-in values and submitting a credit application.
“We are trying to build the brand awareness, but not just about the product,” Carter said. “It has to be about … improving the customer experience, making it much easier to buy the vehicle the way they want.”
SIMPLE IS COMPLICATED
Tim Reuss, president of the Canadian Automotive Dealers’ Association (CADA), said its internal polling reflected the J.D. Power study. The need for change, Reuss said, goes beyond dealers, automaker financing companies and banks.
“Dealers have always been at the forefront of trying to simplify the transaction,” he said. “In order to achieve that, they’ve been facing certain headwinds, such as regulations and how many wet signatures you need to buy a vehicle.”
Reuss called on federal and provincial governments to create a national electronic identification protocol that would standardize the requirements for online transactions.
Dealers also want automakers to ensure that their online platforms direct repeat customers back to their original dealership and involve them in the credit application, said J.D. Power’s Roosenberg.
“They don’t want the transaction to happen without their ability to talk to the customer.”
ClickShop addresses that concern, Carter said. Credit applications are submitted to the dealer, who can then choose between Mitsubishi Motors Finance or a non-captive lender such as a bank.
While COVID-19 accelerated the trend toward online, Carter said, it was under way in 2019 before the pandemic, and he expects it will only grow after COVID subsides.
As automakers and lenders continue to evolve their online offerings, said CADA’s Reuss, it’s important to include retailers in the process.
Because dealers work directly with customers, he said, they can suggest accessories or service plans based on customers’ preferences, “something that’s not necessarily captured on a manufacturer’s website.”