Today's car buyers want transparency, clear affordability information and the freedom to move between online and dealership steps. Yet, how those expectations show up in the car buying journey differs across Europe. In this episode of Talk Auto, Holly and Rich are joined by Paul Hyne, an automotive retail and finance expert with over 15 years experience with the likes of Lloyds Banking Group and Arval, to explore Codeweavers' research with 5,000 car buyers across the UK, Germany, France, Spain and Italy. Together, they discuss what the findings reveal about European car finance trends and what they mean in practice for lenders, retailers and OEMs.
In this episode of Talk Auto, we discuss:
Guest:
Paul Hyne, Automotive retail and finance expert, working with brands like Lloyds Banking Group and Arval
Read the full European Car Buying and Finance Trends report from Codeweavers here: www.codeweavers.net/news/uk-europe-car-buying-trends/
00:00 Paul Hyne
That is a huge question. I'll try to simplify the answer. If we take the last five or six years, average transaction values in used went up while volumes went down. We will see in the coming years a continued reduction in vehicle prices, but that might not translate to a monthly price reduction. The complexity in the market today is enormous.
00:21 Rich Price
Nearly 90% of all consumers said that they really value the ability to move seamlessly from the online journey into the physical retailer.
00:30 Holly Mottram
It's the second biggest purchase somebody is likely to ever make in their life, apart from a house. And when you put it like that, you still want the handshake.
00:37 Paul Hyne
It's all well and good going through a digital process, but really, when it comes down to it, you want to see that car.
00:41 Holly Mottram
So, if you could change one thing about today's car buying and finance journey, what would it be?
00:47 Paul Hyne
One of the most frustrating experiences is when you get declined. Having that transparency around the different options available to consumers would be the one big thing. They use that tech to pre-qualify, to set the right budget. That's definitely how I'd like to see the industry moving.
01:06 Holly Mottram
Welcome to the Talk Auto podcast. I'm Holly.
01:09 Rich Price
I'm Rich, and on this episode of Talk Auto we welcome Paul Hyne, a man with over 15 years' experience in the fleet and finance world.
01:21 Holly Mottram
Fantastic. It's great to have you on the podcast. We're going to dive straight into today's topic, which is exploring what consumers really want from the modern car buying and finance journey, based on research conducted by Codeweavers.
01:33 Paul Hyne
Very well. Yep, thanks for having me. I'm delighted.
01:47 Holly Mottram
It's a really interesting report that we've all been quite involved in, I think, especially Rich and I. So, starting with the research, overall, what surprised you the most about how consumers want to research, fund and ultimately purchase their vehicles?
02:03 Paul Hyne
I think the most surprising thing was how consistent it was across the five countries. You'd expect a bit of variation. I've worked in different geographies over the last few years, so you kind of know that in each one. The UK market, for example, is really mature, so you'd expect higher digital engagement, and then perhaps the southern Europeans, so the Spanish and Italians, maybe less so. That did come out a little bit, but not materially. There was still massive digital engagement across the five geographies. So that, for me, was probably the biggest surprise.
02:31 Holly Mottram
Yeah, I think it was really interesting also to see how consumers researched their vehicles, how important monthly payments were in the initial engagement of a consumer, and how much they value that in the journey. I think for me that was actually my biggest takeaway from the report.
You discussed there that we surveyed different European markets, so that was Spain, Italy, Germany, France and the UK, and you said there wasn't much differentiation digitally. Did you feel there was much differentiation throughout any of the other aspects of the journey?
03:11 Paul Hyne
The biggest difference I remember, really, was that the southern European countries tended to conclude their transactions physically, and started their journey a bit more often in a dealer versus online. The other big difference we saw was between checking out finance deals and checking out the cars themselves. Across the board, people were much more comfortable and confident checking out different finance deals, maybe on comparison sites, maybe on different dealer sites, whatever. But when it came to the car itself, it was much more heavily weighted towards going and seeing it, feeling it, touching it, which is not really that surprising.
03:47 Rich Price
Yeah, I mean, the research shows that consumers are embracing these digital tools that the lenders and the dealers have to offer. But from a lender perspective, how does that trend impact how you work with your network of dealers?
04:01 Paul Hyne
It's really, really important. If we go back, we've been on a journey since, I guess, the pandemic, the great lockdown of 2020, when everyone was buying cars at home and that was the way everyone was going to do it from then on. We did see a big, big spike, but it has really come back down, and that market share, if we want to call it that, hasn't really continued to grow. It's still a relatively low number of transactions, in the used car market in particular, that are completed entirely online. But it's still an important part of the market.
From a lender's perspective, it's really important that, if we're remote from that transaction, we have absolute faith in our partners: that they're doing the right things, that they're having the right conversations, and that they're explaining everything that needs to be explained to the customer, so the customer knows exactly what they're signing up for. Because we've all been there. We can all appreciate that you've got a lovely big shiny car that you're desperate to take away, and as a consumer you can just lose focus, can't you, on the details. You know, "I know how much it is a month, and I'm happy to just sign because I want to take this lovely car."
We've got to have absolute faith that we've put processes in place, checks and balances, to make sure we can see that things have been done right and that we're working with the kind of network that does the right thing. Take the regulation out of it, it's just the right thing to do.
05:12 Holly Mottram
Yeah, I think one of the other big takeaways from the report was how important trust and transparency were throughout the whole process. Whether that's looking for a vehicle online, looking in person, from a lender perspective, from a provider perspective, from an OEM perspective, it's just ensuring that the consumer has the confidence to go through that process, knowing that at every touchpoint they're going to have that trust and transparency from the providers. And you're right, I think especially from a lender perspective, it's really, really important, isn't it?
05:40 Paul Hyne
Yeah, and that shows up in really different ways. You've got trust and confidence in the vehicle: have I got the right warranty? Does it look and feel right? Is it as described when I go and see it? But then you've got what are the numbers that I'm looking at? What deposit is it? What's the monthly payment? What product am I using, even? Is it a lease, is it an HP or a PCP? Am I buying for cash? So the other thing that came through in the report was that the consistency of those messages is really important, and equally important in all geographies. One of the things that jumped out at me was the frustration when you look at an online price, you go to the dealer and suddenly it's different. There's a different deal on the table, or whatever. And that's really frustrating for consumers.
06:18 Holly Mottram
I think that connected journeys piece is really important. Rich, you're on the host side, but I'd actually be interested in your perspective as well as Paul's. From Codeweavers' perspective, as the company that did this research, if customers naturally move between physical and digital channels, how well connected are they today, and what kind of work is there still to be done?
06:42 Rich Price
Yeah, so, I guess from the research and the feedback that we had, nearly 90% of all consumers said that they really value the ability to move seamlessly from the online journey into the physical retailer. So I think it's super important that that offering is available. And Paul, you mentioned it: having the ability to see finance calculations in real time and know that the deal they can get online is actually replicated in the showroom. It creates that frictionless movement between the online journey and still working with the dealer, because, to your point, particularly in that used car space, the consumer still wants to touch and see the vehicle. They've not ordered it from a spec sheet. It's new to them, of course it is, but actually it's still a used car, and the data shows that they still want that engagement with the dealership.
07:47 Holly Mottram
Absolutely. And Paul, from your perspective, are there any blockers to that connectivity currently? And where do you think that might be going in the future? Because I'd say as an industry there are tools that exist to ensure that there is that consistency across both channels, but we're not at an absolutely perfect stage yet, are we?
08:07 Paul Hyne
No. Whilst everything's getting better, there's still a bit of fragmentation. There are a lot of parties involved. You've got people like Codeweavers who are knitting it all together at the dealer end. You've got the funders, who have got their own systems that might need the credit proposal coming through for credit checking and payout and all those sorts of things. You've got perhaps another intermediary who's advertising the car. All of these things need to interconnect, and whilst it works quite well, there are lots and lots of points where there could be a failure. That's when things sort of fall over, especially with something as simple as spotting a car on an online website that's maybe a hundred miles away, and by the time you get there, or even if you've called ahead, that car might have been sold. How frustrating is that? You get a pretty bad experience. So I think the whole end-to-end journey is really, really important.
What I'd add, certainly from my experience in recent years, is: even after you buy the car, how do you handle that finance product? What if you need to change your mileage? What if you want to settle early or make a one-off payment or something like that? There is a huge disparity across the market. My recent experience at Lloyds, and of course I'd be biased, is that we've got brilliant tools, and customers can completely manage their contract online and do whatever they want within that. So I think if you're at the dealer site, you can explain some of the benefits of that finance product, and that's not fixed in stone, you can modify it later, within reason, of course.
The other thing that came out in the survey, which was perhaps a little bit surprising, was that customers across the geographies were happy to engage with finance, but then a lot of them wouldn't actually complete on finance. And if we say finance in terms of a PCP or HP or whatever, clearly expensive cars need to be funded, and a lot of people aren't sitting around on twenty or thirty thousand pounds in cash. So there might be other loan products and whatnot. I think one of the things we can really do as an industry is help customers understand the different benefits of the products. If I take PCP as a simple example, what people don't realise is, A, they don't own the car. It is almost like a lease, because you're funding the car while you have it in that contract. At the end you can either pay off a big balloon payment, or you can give the car back, or you can exchange it for another car, whatever. So if you compare that with, let's say, a loan for the whole balance of the car, the monthly payment's going to be higher and the term of that loan's going to be longer.
10:24 Paul Hyne
But you get less protection, less benefit. The funder of that vehicle, in the PCP case, has got some responsibilities to make sure that vehicle is roadworthy. If there's a challenge with it, it's the funder that's on the hook for that. So you get a lot more protection. I don't think consumers really understand that when they're just looking at the monthly payment.
10:39 Rich Price
Yeah, and again, I think we're talking very UK-centric with that view, because in my experience, as we've looked at those European marketplaces, finance calculations on dealers' websites are absolutely there. But in a lot of cases they're not real time. They're indicative, based on the current rate book, but not actually going into any of the consumer's personal data, credit score, soft credit checks or any of that.
To that point, in the EU the flow probably isn't quite as smooth as we have it in the UK today, because in most cases there is no guarantee that the consumer will get the same rate on that vehicle when they arrive at the dealer in those European marketplaces. That's not the case everywhere, but it's just not as common in that space.
11:31 Holly Mottram
Absolutely. I think it told a story, that report, didn't it? You're right, there are definitely some similarities between each country, but there are also some nuances, not even necessarily just between mainland Europe and the UK. Each one has a different relationship with the retailer, a different relationship with the finance provider, and different preferences for how they purchase vehicles. It definitely tells a story. And to your point, Paul, you mentioned how many elements there are to buying a vehicle and how many external or third parties are involved. I think one of the biggest takeaways was that delivering the car buying journey and the after-sales journey requires retailers, lenders, providers, etc. to work together. So what do you think are the biggest opportunities to improve those connections between the businesses today, to ultimately improve the consumer experience?
12:23 Paul Hyne
Yeah, that's a big question. I think probably consistency is key. There are a lot of different funders out there, for example, and a lot of different dealers out there. Each one will have different ways of working, maybe a few different processes, different tech underpinning that. So the more we can be consistent and present the stages in as consistent a manner as we can, the better. Based on my experience, the pre-eligibility bit we were just talking about is probably the biggest single thing, and certainly from the UK perspective we've got the tech in place that can enable it. That can really change what could be a really painful journey if a customer gets declined, for example. If you know upfront what you can afford, then perhaps you can pick the car that's right for you, rather than picking the one you really want, which may be out of your reach, and you maybe know that already. If you can get that sorted at the front, then you can search for your vehicle based on what you can afford, which might mean less friction and, more often than not, a good outcome.
13:25 Rich Price
I think budget search is a really important part of that process. Historically, we've obviously operated in a world where everyone's looking at the on-the-road price of the vehicle, and then they would almost predetermine what brand they might even be able to go into based on their own perception. Whereas that budget search function, and having it available, and again, in Europe, that is something in the other four marketplaces that just doesn't seem to be readily available, or they haven't thought about it. And again, maybe that's because they're not so heavily ingrained in that world of PCP like we have been for a long time in the UK. I saw in Spain a couple of weeks ago, on the website of a large dealer group there, they call it "finance with balloon", as sexy as that sounds. But again, it's an entirely new thing and it's all indicative. There's no factual data there other than the rate that the lender is stating. And then you've obviously got to go to the dealer and go through that whole process with them.
14:37 Paul Hyne
Yeah, and if we go into the leasing side, certainly across all those geographies, in a previous role I worked across all of them, private leasing, as it's known out there, is increasing massively, and it is based on that monthly payment. Ultimately, in theory, the lease is a little bit like finance with a balloon, except in the lease case you don't have the balloon: you give the car back and you get another one. But it's absolutely based on that monthly payment. Clearly it's new car market focused, but increasingly used. From a dealer perspective, there's a role they can play in explaining the different kinds of products, but ultimately their role is still helping the customer choose the right car, providing the car and giving a good service. And then whoever the funder is behind that is there to make sure the process is smooth, things can get paid quickly and the customer can drive away.
15:25 Rich Price
So you said, and I agree, that we absolutely need the retailers, the lenders and the technology partners to work together more succinctly and better to evolve the product and the offering. But what do you think is probably the biggest gap, and the thing that would join that up and connect it better today that we don't have?
15:48 Paul Hyne
I wouldn't say there's a big gap. If we go back to what I was saying earlier about the fractured market, if we want to call it that, it's just lots of different components. There are lots of different people out there doing lots of different things, with different tech, different companies, different ways of working. So I think the more we can standardise the approach, the better. Perhaps wishing for a common platform across everything would be, I mean, it would be great for Codeweavers. But I'm not sure that's the right thing in the marketplace. I do think we can standardise how things work, so that even if there are different platforms interacting, they interact through, let's say, a common API or a standard process, with standard fields, for example, that you're filling in. I think there are lots of things like that that can be done. Particularly around my first point on stock management. It's something I see more often than you'd imagine, where the customer turns up to a car they've sometimes even applied for remotely, and it's not there. We're not talking 10 or 20% of transactions, but it happens more often than it should. And in a market like the UK, with eight million transactions a year in the used car market, even a small percentage is a lot of bad experiences. So that stock management piece, and linking that up really, really tightly, I think is important.
17:07 Holly Mottram
Yeah, absolutely. And looking at what we've touched on, the fact that consumers want that omnichannel journey. They want to be able to look online, research, possibly use third-party sites as well as the OEM or the retailer site, and then go into the dealership, maybe test drive, maybe go back out. There's very much the option now to go in, to go out, to look for information wherever that might be. But what the report found, quite overwhelmingly, actually, was that the point at which people interact most with the dealership is the final part: the purchase of the vehicle or the finalisation of the finance as well. So what do you think people are looking for in that final phase as a human interaction? I'd say it's quite indicative. We want to be trusted, but it would be interesting to get your take.
17:57 Paul Hyne
Yeah, I've got two views on that. One is the car itself. It's all well and good going through a digital process, but really, when it comes down to it, you want to see that car, you want to make sure that it drives and that it's not got dinks and dents all over it, or whatever. So for me that would be the most important reason a customer would go into a dealership to finish that off. And secondly, it ties exactly back to what we were just talking about, the different processes, because in certain cases everything can be done entirely digitally, and in other cases, with other funders, let's say, there's a manual intervention. And certainly there are regulations around certain car values as well, where you have to sign in person. But fundamentally, in my view anyway, the reason most people complete face to face is because they want to see and touch the car before they commit. It's a big purchase, isn't it? So people really want to make sure that they're getting it right.
18:51 Holly Mottram
Yeah, I think somebody on the podcast before, I can't remember who it was, said it, and very rightly so: it's the second biggest purchase somebody's likely to ever make in their life, apart from a house. And when you put it like that, I'm aware we're a very advanced society when it comes to digital, but you still want the handshake. And you might still want to smile and talk to someone and just check that every single detail is ironed out with that purchase.
19:13 Rich Price
I also think there is an element within that, from the dealer's perspective, when they're looking at the value-added products they can offer. If that journey is purely carried out online, then from a lender's perspective it's the same amount lent whether it's done purely online or with the retailer. But the retailer's opportunity to generate more revenue and find margin in additional products actually comes from some of those value-added pieces, like different insurances and paint protection, those sorts of things. And you wonder, again, if the consumer just follows that journey purely online, what the opt-in or opt-out would be on those products as well.
20:01 Paul Hyne
I think it's valid. Ultimately, any dealer has got to make a given amount of money to be in business. You've got to pay for the property, the staff and all the other bits and bobs. So if there's less money in the metal, less margin in the car, then there have got to be other revenue streams, which perhaps in the past would have been aftermarket, where customers would find them online or do it themselves. Now the dealer can offer that there and then. So it's a bundled proposition.
But I'd also say, let's not forget there's a part exchange in a lot of cases as well. So the dealer's got to be able to understand what that is, and this is where the tech comes in. How can a dealer value that car? How can they see how they would distribute that particular vehicle, either back through auctions, or selling it again, or another third-party route? So there's a big ecosystem behind all of this that still drives a lot of physical activity. You can have great inspection apps and all of these self-inspection capabilities, but we're all creatures of habit, and we all like to touch and feel and see these things.
21:03 Rich Price
Yeah, again, some of the feedback I've had from dealers is that they have the ability, with the partners they have today, to do that full finance application journey online. But it's that point you made there, Paul, about the part exchange that sits in the middle, which is almost the grey area, because you're relying on the consumer to be accurate in their appraisal of their part exchange. And if they're not, how does that then affect the amount to be lent at the end of that journey, if there is a discrepancy between what they valued that car at online versus its actual condition-based value when they get the vehicle in front of them at the dealership?
21:44 Paul Hyne
Agreed. And it's not all on the consumer side. If you're the dealer or the lender, you've got to make sure that the person applying for this finance is a real person. Fraud is getting harder and harder and harder to detect. There's all these, is it phantom fraud, where you get completely made-up personas, where someone's attached to an address and then opens a few different accounts to get a credit history, and that turns into a proper application, and there's not really a person at the end of it. So it's not just about the consumers, there are other factors to consider.
22:17 Holly Mottram
Absolutely. Now, we've discussed how important it is to take the journey into the dealership for consumers. How can technology make that an easier process for the consumer, so that they arrive at the dealership confident, feeling like they have received all the correct information and ready to make that purchase?
22:41 Paul Hyne
I found this quite an interesting part of the research, because in my world it's all very consistent. We can facilitate the transaction in advance online, and then when the customer arrives, we just check everything over and it all flows automatically, through Codeweavers or whoever. But clearly in a lot of other geographies that's not the case, because it was one of the big frustrations that came out of the report, wasn't it? Having to re-enter data or go through the same process again. So I found that quite unusual, and clearly so did the consumers in the survey.
23:12 Rich Price
I think that's one of the things, particularly from a European perspective: whilst in theory the technology we have here in the UK should be easily replicated in the EU market, there is actually a lot of frustration for the consumer that if they start their journey online and decide that it's not for them today, or that they feel more comfortable going and visiting, they then have to start that entire process again. Whereas there is a lot from a technology perspective in the UK where the consumer can start that journey online, and if they decide they're pausing on that, or they want to take a break from it for a couple of days and reevaluate things, and then they turn up at the dealership or they go back online, they can just continue that journey from exactly where they left off.
24:06 Holly Mottram
We all know how annoying it is to refill a form, don't we? Whether it's for finance or anything. You never want to do it twice. So I completely see why it's a frustration in Europe, especially because we have that technology.
24:17 Rich Price
Yeah, yeah, absolutely. So, moving on to our next section, which is hot takes. We're going to take a pause for our quick-fire questions. We want your automotive finance hot takes. What's one assumption about car buying or automotive finance that you think the industry needs to challenge?
24:37 Paul Hyne
I would say "one size fits all". I speak to a lot of people and it always surprises me how people just say, "Well, it has to be this way," which is absolute nonsense. There are people out there who are very happy to do the entire thing offline, you know, order a car 400 miles away and get it delivered to the front door, never seeing it, that's fine. And there are lots who aren't. So there's no one size that fits all. That is definitely something that I think we need to understand. And I don't think everyone needs to do everything either. You can specialise. You don't have to be someone who can do absolutely everything. So one size doesn't fit all.
25:12 Holly Mottram
We had quite a nice one on this when we got the questions through. I quite liked "digital first doesn't mean digital only". And I think it's very true to what we've discussed today. I think in the UK especially, I wouldn't say that we're digital first, but we're definitely not digital only. And that has clearly resonated with consumers throughout the UK and Europe as well.
25:35 Paul Hyne
Yeah.
25:36 Rich Price
I think there is clearly a growing confidence around doing things online. I think the element in purchasing a car online comes back to the point we made a few moments ago, which is that it's such a big purchase. So buying your groceries online is very, very different to buying a car online, to a degree. But then I also think that, like I said, with the technology that we've got, and you mentioned fraud earlier as well, Paul, with the ID&V checks that are now available, okay, there will always be things that slip through, because everything's evolving, and as those checks get better, the fraudsters get better, and so on and so on. But I think the thing for me is, you're right, one size doesn't need to fit all, but the fact that we have the technology and the capability to allow a consumer to go as far on the journey as they want is really important, because that will ensure that, as consumer confidence grows, they will then be able to do more online. I think that's super important.
26:51 Paul Hyne
I think it's a great thing. Twenty years ago, maybe more, you'd go to your local dealer and buy your car, so that local dealer had a local customer base. Now that customer can go all over the country and choose the car they want, but the dealer's got a customer base that's the entire country. I think it's a great thing. And, you know, different strokes for different folks, as they say.
27:10 Holly Mottram
Absolutely. Fantastic. Now let's move on to the last section of the podcast today. We've talked about how consumers want to navigate the car purchasing journey, but from your experience, what do you think ultimately drives somebody to go from researching to actually committing to the vehicle?
27:29 Paul Hyne
It's always the same thing, and it comes down to cost. What's my budget? You hear stats across the industry that an individual might take 30 or 40 days from their very first search to when they stop searching and therefore have likely bought that car. And I think that during that journey, I've seen some of the stuff from Autotrader and other companies, they start looking for a Range Rover and they end up buying a Fiesta. A silly example, but you know what I mean.
27:57 Rich Price
They didn't know what they wanted originally.
27:59 Paul Hyne
It's human nature. We always want the best thing we can have, and then ultimately we have to settle for what we can get. A car is probably the biggest example, certainly in my personal experience anyway. So I think having that budget settled is the defining factor. Often people won't buy a car just because they want a car. They'll buy a car because they need a car to get to work, to get to school, whatever. And then it becomes how often they need to change that car, or whatever it might be. So it all comes down to cost at the end of the day.
28:34 Holly Mottram
Absolutely.
28:35 Rich Price
And I guess, we talk about it all the time in terms of the new entrants that are coming into the market. From a lender's perspective, how is that impacting what's being lent? Is it reducing the amount being lent on average per vehicle, or is it increasing because the traditional, more established brands' prices are going up? How's that?
29:05 Paul Hyne
That is a huge question. I'll try to simplify the answer. If we take the last five or six years, we've had mass inflation in the used car market for the first time ever. Used cars shouldn't inflate, they should deflate. They should be worth less a year later, but that went the wrong way. So average transaction values in used went up while volumes went down, because there were fewer cars coming into the new car market and flowing into the used. In the last 18 to 24 months, we've seen that stabilise as the age of cars normalises and the price normalises, but it's still about 20% higher on average transaction value than it was pre-pandemic.
In the new car market, absolutely in EVs in particular, the average ticket price is coming down and down and down as the market broadens. We've gone from a relatively high concentration of expensive EVs into something a bit more mass market, driven in large part by the new entrant brands. But that's sort of tempered in terms of the monthly payment dynamic. There are a lot of 0% offers out there and all those sorts of things. So I think we will see in the coming years a continued reduction in vehicle price, but that might not translate to a monthly price reduction, because if there's more volatility in the market, if used values start reducing more quickly than they have done, then lenders have to account for that and reforecast their residual value expectations, which might mean that the gap between buying the car and what it's worth in a few years at the end of the contract might change, and therefore that monthly payment might change.
What I would say on the new entrants, and actually more generally, is that the complexity in the market today is enormous. If you're a consumer or a lender, you need to go and see these cars, because apart from seeing one driving down the road, or perhaps knowing someone who has one, you need to see what they're like and how they work and all the rest of it before you can make your decisions. So that's driving people back to that physical location, because they've got no idea what that car is actually like. That's probably something that's come out in recent times, and that definitely is a trend that's going to continue. So many new brands coming to the market.
31:09 Rich Price
I was speaking to a dealer group a few weeks ago, and I was speaking to the MD there, and they'd just taken on Omoda Jaecoo. Traditionally they had a number of Kia sites, and they still do. I said, "How are you finding that?" and the response that they gave me was the reason why they'd taken on OJ. Yes, the product's good, but that Kia driver who, let's just say, had a Sportage three years ago was spending £350 to £400 a month on that, and now can't get into a Sportage for £350 to £400 a month. So the Chinese brands, OJ being one example there, now have a product that enables them to retain that customer with the same budget spend that they had before, but just moving them into a different brand that has comparable technology, et cetera, which I thought was really interesting.
32:05 Paul Hyne
Yeah, totally agree. And what's really encouraging this year is that the market is growing for both new cars and used cars. We're roughly 10% up year on year in the new car market, so 10% more cars being sold, which is a great thing. And we're now seeing used car transactions back to pre-pandemic levels. So the market is buoyant. All the things we're talking about today are really, really important to get right, because there's a lot of demand out there, in spite of what the macro situation might be. If we can get that journey right, get the tech right, and make life easy for everybody, then that'll keep that market going, and there are a lot of people who work in this industry.
32:38 Holly Mottram
Yeah. Now, I'd be interested to know, Paul, from a lender perspective: when customers are going through that car buying journey, what do they need to see, feel or understand before they know they're making the right choice for a vehicle? I know we've mentioned affordability and monthly payments. Is there anything else you think is important?
32:57 Paul Hyne
If we take the products we talked about before, is a PCP right versus hire purchase, versus just a personal loan, or just cashing out your savings or whatever, it's really important that customers know the difference between those things. It doesn't just come down to the monthly payment. There are all sorts of reasons why you might choose one over another. What I see is people look at the headline APR, and you'll see that the headline APR on a PCP is nearly always more than you would see on a personal loan, for example, and there's good reason for that. But equally, the monthly payment might be different and the total amount payable might be different. So it's really important the customer understands, A, the total amount they're taking on in terms of the debt and what they do to pay it back, but also what consumer protections they've got within those products. So whilst the APR might be a bit higher on the headline rate, if you've got a PCP you have the ability to take that car back in two years when something happens to it, and you can give that car back, and if you've got a personal loan then you're on your own.
So, to be clear, if you've got a PCP it's the finance company that's responsible if that car ultimately fails and there's a defect with it. You don't have that protection if you've got a personal loan. So I think the value within the product is really, really important. And outside of that, it's kind of everything we've discussed really. It's the right car for you. We've got a lot of people coming to us looking at EVs for the first time, because diesel's two quid a litre and petrol's £1.70 a litre, so we've got to help people understand: can you charge at home? How much do you drive? What's your average journey time? How many miles would you do in a single journey? What's your budget? All these things matter, because what we've seen in the last few years, and we as a lender have really felt the pain through the used car market, is that people choose the wrong car and choose the wrong product, and therefore they have a bad experience, and they tell people about that bad experience. Then that puts people off trying it, and so on and so on and so on. Now we're actually seeing that flip the other way, and we've got a lot more information, a lot more education out with the dealers.
We do a lot with our dealer network, and there's now a formal education programme out for independent dealers so they can help sell EVs more effectively in the right way and help customers make a more informed decision, which hopefully brings that stability back into the market and makes sure that customers get the car that's right for them rather than just looking at the monthly payment.
35:16 Rich Price
And so with that in mind, from a technology perspective, how do we bring that transparency into the technology that we offer to the consumer?
35:29 Paul Hyne
Well, this is where the digital tech can really be important, because as a consumer just surfing the web and looking at different cars and things like that, you can actually filter and funnel from that point. You can ask various questions, you can engage in a more dynamic way. We've now got agentic AI, where you've got the ability to have a dynamic conversation, you know, at three o'clock on a Sunday morning or whenever, if you want to. So I think we can absolutely use that tech to help that journey, so that when the customer's ready to click buy or ready to click view, whatever it might be, they're totally informed, they've had all the right questions answered, and anything that's left over is the really, really important stuff.
36:07 Holly Mottram
Yeah, absolutely. Now, something that was covered in the report, and you mentioned it earlier actually, is the gap between understanding finance and adopting finance. I think that was a really interesting takeaway: for example, in the UK I think it was over 90% of people understood the concept of car finance to a decent degree, but the number of people who take it is significantly less than that. So from your experience, what do you think happens between the consideration and conversion stages in finance, to speak to that disparity?
36:40 Paul Hyne
I think there are a number of things here. It's completely different in the new car market versus the used car market. In the new car market, we see finance penetration of 80 to 85% across the board. In the used car market it would be 30 to 40%, just in general terms, and I'd say that's for used cars up to eight or nine years old. Beyond that, they have much lower value and it's a different kind of conversation. So I think the conversation around that comes down to that headline rate again. In the new car market, more often than not, finance is subsidised one way or another, so the car manufacturer or the dealer network might offer 0% finance or discounted finance or whatever. The price of that vehicle is a lot higher, so the chances of someone having the cash to buy it are a lot lower. That's where you might see that different conversation. It might feel like more value to a consumer, because it's 3.9% APR and not 9.9% APR. So that again lends a different conversation to start with, but it all comes back down to the question of value.
Does the consumer feel like they're getting value for something? As you go into the used car market, there are more options available within that value conversation. I mean, we spoke about the high APR, but the trade-off is that you get better consumer protection, and you're effectively borrowing a lower number, whilst there is a balloon at the end of a PCP. So I think that whole conversation around what value I'm getting by how I finance that is the big thing. So people, in my experience and my view, people answering that survey saying, "Yeah, I get finance," I don't think that they do. I think they understand what an APR is and what a monthly payment is, but that's where it ends. I think there are very few people who actually understand the difference between the finance products, and then you add leasing into the mix, which is a whole different proposition again. So I'd want to talk to those people a little bit more and see what they really understand.
38:27 Rich Price
Do you think the dealer networks do enough with their own employees to educate them to make better decisions? I know they can't give financial advice and those sorts of things, but do they explain to the consumer the difference between those products more thoroughly, so the consumer can make a better-informed decision?
38:49 Paul Hyne
I think there is work to do there, and I think that would be a great thing. I do sort of worry that sometimes the conversation is more focused on just getting the sale closed and moving on, rather than really making sure that everything's done thoroughly and properly. But that's life. There are many regulations that cover all of those things, but you can never be too good, either. We've all bought cars at some point in our lives, so I'm sure we've all had good and bad experiences. But I would say that the market in general is getting much, much better, much more professional, finance is much more common, and the conversation is getting better all the time.
39:27 Holly Mottram
And I know you mentioned there that it's not necessarily down to a less well-connected finance journey that we're seeing the disparity between what we think might be a recognition of understanding finance and adoption. But do you think that finance journey could be better connected, or do you think that disparity is also down to personal preference and how you view borrowing and ownership?
39:53 Paul Hyne
Yeah, it's a really good question. I think it could be better connected. I've seen in other geographies, particularly the US actually, they've got a really good system where finance is much more broad. Customers can be approved by a whole range of institutions, and they're often assessed on a credit score basis, a rate for risk, or whatever phrase you'd like to use. More often than not, it's their bank that offers them the best rate. But the whole process is a little bit more open, a little bit more untied, let's call it, than we might see in the UK or in some of the European geographies. I do think that's a good way of doing things, and I do think the market's heading in that direction. I can see a place in a few years' time where we might see more comparison sites for finance products that then wrap into car buying, or vice versa. So I do see an opportunity to do things a bit differently.
40:42 Rich Price
That's great. I mean, on a previous episode, we spoke about how the UK is ahead of the US from the fact that they don't offer PCP and those sorts of things. But from your experience, and you mentioned working in the other European markets in a different role, is there anything that you think they do in some of the European markets that we don't do in the UK that we could look to?
41:07 Paul Hyne
I haven't seen it that way around. I think culturally it's just different. I think certainly in France, definitely, and certainly in Italy and Spain, it's a little more local. You're much more likely to work within your local area, and that's where we see the bias towards going into your dealer. So you might see more that someone would go into a dealer and see what they've got, rather than going in there to look at a particular car they've seen online. I think where we've got that whole national coverage, if you like, and that improved digital capability online, that's a better way of doing it. And like I said earlier, that works for the dealer and it works for the consumer. So I do think we are better in the way our market's a bit more mature, but I haven't seen out there any kind of nuggets of gold that we could really learn from. I think we're pretty well matured in the UK.
41:54 Holly Mottram
Absolutely. And then one final question to wrap us up, I think. If you could change one thing about today's car buying and finance journey to give consumers greater confidence, what would it be?
42:06 Paul Hyne
A single thing it would be is that kind of open finance platform, let's call it that. I think there are a lot of different finance options out there that people don't realise. If you take Lloyds as a simple example, Lloyds offers its own banking customers finance products via the banking app. I think most people don't even know that. So I think there are often things that people don't necessarily know they have. So, having that transparency around the different options available to consumers would be the one big thing that would really change that market dynamic. It all exists today, so this is where tech can surface that in a different way. That would be the one thing I think we could change.
42:42 Rich Price
Yeah, it's interesting because, like I said, from Codeweavers' perspective, we're not a broker. Our objective is to be a tech partner, which is again to be agnostic. With that view in mind, do you mean that the dealers and OEMs have a bigger, almost wider lender book, and that they don't almost put themselves into having a captive lender and a secondary, and potentially some don't even have an option?
43:13 Paul Hyne
That's kind of what I'm saying. If we go back to one of our earlier conversations about the risk of failure, one of the most frustrating experiences, other than having to redo your data, is when you get declined, and then you've got to go through a different process. And if that particular dealer doesn't have a lender who will accept you, that's really frustrating. So if you could pre-qualify the customer in the first place, if you had a broader panel of options available, then that takes that whole journey out. You can use that tech to pre-qualify, to set the right budget. It sets the expectation, adds value, gives great service and a good experience, all enabled by tech. So that's definitely how I'd like to see the industry moving.
43:52 Holly Mottram
Fantastic. Well, thank you so much for being on today. I think that's been a really insightful conversation, and we're very glad as well that you enjoyed the report and got some very good insights from it too. Thank you very much for joining us.
44:01 Paul Hyne
Thanks a lot, Holly.
44:07 Holly Mottram
Thank you for watching this episode of Talk Auto. As ever, we have an email in our show notes if you'd like to contact the show.
44:13 Rich Price
And follow us wherever you get your podcasts from, and you can watch the episode on the Cox Automotive Europe YouTube channel.
44:19 Holly Mottram
We'll see you next time for another episode of Talk Auto.