Quotevine CTO and founder Dan Layne believes the data generated by connected cars is going to transform the auto finance sector
Connected and autonomous vehicles have been hailed for the social, industrial and economic benefits they will bring to the UK.
Powerful computers in their own right, these vehicles will not only transform our personal driving and car usage habits, but disrupt the entire ecosystem around vehicle manufacturing, shipping, insurance, maintenance, and finance.
This last point is particularly pertinent, as the trend towards ‘Mobility as a Service’ gathers pace. The move towards vehicle usership rather than ownership is well documented in the consumer sphere, with the arrival of apps such as ZipCar and Hiyacar.
Soon this trend will permeate the enterprise space, allowing for major vehicle fleets to be handled more efficiently.
This has a significant impact on the traditional economics of vehicle valuation and leasing, as well as the role that lessors play in the cycle, and the customer experience they must deliver.
Disrupting Pricing Models
Connected cars expose automotive leasing businesses to a new layer of complexity. Conventional leasing models, whereby contract prices are determined by fixed parameters – i.e. mileage requirements, car choice, duration, residual value – will no longer be enough. With over the air data or software updates, connected cars have the potential to become smarter, and therefore actually increase in value throughout the duration of the contract as new functionalities are added to the car. Automotive finance businesses will need to adopt new and innovative ways to value contracts and address this change, otherwise they risk losing ground to new players.
Smart and Dynamic Pricing
One of the most exciting opportunities that connected cars present in this area, is to support flexible, dynamic pricing. At the moment, finance companies rely on guesswork, averages, and manual effort to price customer contracts. A leasing specialist with access to the right mix of data could use previous personal and driving related history to create a range of adaptive vehicle plans tailor-made to the customer’s profile.
Tapping into mobile devices and cloud-based quoting engines would greatly increase accuracy. Cost savings and helpful push notifications could then be delivered to customers – for example, by helping them avoid charges on excess mileage, based on forecasted driving time.
These benefits of advanced data use extend to enterprise leasing, with huge potential for cost savings for large corporations running fleets of thousands of vehicles. Fleet optimisation is a major concern for these businesses, who are looking to reduce wastage across their vehicles. This is where smart data analysis feeds into the car-as-a-service phenomenon. For example, businesses could cross-reference data on which of their employees live near each other, tend to drive to and from work at similar times, and stay based at the office during the day. It might be that some employees would be open to a car-share scheme, or alternatively, these vehicles could be re-deployed in the day, rather than sitting in a company car park as an unutilised asset.
From Tactical Service to Value
In a conventional vehicle leasing model, the lessor would sign away their asset, and then likely have no sight of that asset until the contract expires. Connected cars will allow lessors to better monitor the vehicles to ensure that mileage is as per contract, and vehicles are not being misused. It will be the smart operator who instead of using this purely as incentive, sees the potential to e.g. upsell a customer into a more suitable vehicle when certain behaviours are detected.
It’s also a golden opportunity for the automotive finance industry to start matching the type of personalised, digital service that consumers have come to expect. Real-time vehicle and driver data brings the potential to suggest more refined offerings in line with individual driving and living habits, and budgets. This could include a ‘nudge’ when their driving style isn’t fuel efficient, notifications of required vehicle repairs, or guidance as to where the nearest garages are.
Barrier to Innovation
The challenge for leasing companies is how to gather and interpret these new and rich streams of data, to be able to convert them into customer value, and new revenue streams. Current systems aren’t set up to access and process this data for real-time benefit, but will rely on new and specialist forms of cloud-based digital technology. Data is absolutely central to the future of the entire vehicle ecosystem, and is the key to powering more innovative leasing solutions, which are better matched to customer expectations – whether for work, or play