The increasing availability of finance and the growth of subscription models is creating a dramatic shift in the automotive industry with the age of traditional ownership coming to an end.
But according to Auto Trader, the UK’s largest automotive marketplace, it’s a mistake to think that car ownership, or indeed the traditional retail sector, will be a victim of the sharing economy. Auto Trader’s bi-annual Market Report shows that most motorists (80%), especially younger drivers (86% of those aged 16-21), still want exclusive access to a vehicle. The need for independence (80%), an unwillingness to share (51%) and the pure convenience of a car (48%) were all cited as the top reasons for not wanting to give up exclusive access to a car.
Auto Trader says that almost every day new players are emerging that can give them that independence, such as Drover’s pay-monthly subscription service or Volkswagen Financial Services’ new Rent-a-Car scheme. Interestingly, many of these models will offer the same level of direct access as finance contracts, but in a more flexible, convenient and cost-effective way.
Finance, leasing and subscription deals are set to fuel the market for new cars in particular says Auto Trader. The Company predicts that within the next 10 years all new cars will be bought via one of these models, challenging the traditional sense of ownership.
It also reveals how the wider economic uncertainty could also play to these new models’ favour. Also, 98% of motorists who bought a car on finance claimed they owned the vehicle, even though in reality they don’t. Auto Trader says motorists seek the comfort and certainty of exclusive access, or usership, and find it hard to distinguish this from true ownership.
New bundled subscription models and more flexible ways to access vehicles will open-up the market. One in five (21%) consumers are already open to using a less traditional ownership model (cash purchase or PCP). This is a higher trend with Generation Z, those aged 16-21, (35%) who will make up the majority of car buyers in 2040.
Contrary to speculation that the growth of these models signals the death knell for traditional retail, increased popularity of alternative usership models represent an opportunity for the industry. They will make car ‘ownership’ more accessible to more people, will offer manufacturers a new way to get consumers behind the wheel of their cars, and crucially, will complement rather than cannibalise existing retail models.
Auto Trader’s Chief Financial Officer and Chief Operating Officer, Nathan Coe, explained: “The evolving concept of ownership and the growing spectrum of access models represent one of, if not the most, dramatic shifts in the retail landscape. It also marks one of the biggest opportunities for retailers and manufacturers.
“For one access model to win, it doesn’t mean another has to fail; that is, for subscription models to thrive, PCP or PCH won’t be required to collapse. However, as consumers increasingly source their cars in the same way they do their music or movies, the route from business to motorist will need to evolve alongside it. Rather than relying on just traditional sales, retailers will need to facilitate the supply of both new and used cars to service providers, as well as providing new types of flexible aftersales, logistics, and infrastructure services that will be required to operate these new models.”
“The industry has been in a period of transition for a long time, this is just the next big step. The change will be gradual, but inevitable none the less. The way in which retailers and manufacturers respond to these changes today, will define their success tomorrow.”
To download the Auto Trader Market Report, please visit: https://plc.autotrader.co.uk/press-centre