Global menu

Our global pages


Automotive: The impact of technology on vehicle dealers and vehicle finance

  • United Kingdom
  • Industrials - Automotive



It is clear to all that our vehicles are becoming increasingly autonomous and connected and, by 2020/21, a number of manufacturers are predicting that they will be ready to sell vehicles that are capable of operating in fully driverless mode on public roads.

The impact of this technology is set to fundamentally change both the nature of vehicles and the way in which it will be possible to use vehicles. This in turn is set to have a radical impact on consumers who purchase vehicles and/or the right to use vehicles and, as a result, the way in which vehicles are financed.

In so doing, both manufacturers, dealers and finance providers will need to rethink their business models in the light of the impact of:

- digitisation and omni-channel on the retail experience

- connected and autonomous vehicles

- car/ride sharing; and

- consumers looking to purchase mobility experiences rather than vehicles

The vehicles of the future will change the way in which vehicles are sold and financed

Firstly, as vehicles become increasingly connected and driverless, consumers will increasingly focus on the technology that a vehicle offers rather than the way in which it drives. Simple as this may sound, the process of demonstrating the technical features of a driverless vehicle and all of its options will be more complicated than a traditional test drive and consideration of different engine and trim variables. As a result:

  • With a driverless vehicle, it will not just be about the technical capabilities of the vehicle in driverless mode but it will also be about what the occupants can do in the vehicle whilst being driven. As a result, there will be a myriad of options for configuring the interior of a driverless vehicle and in relation to the technology, finishes, services and experiences which it will be possible to deliver to the occupants of a driverless vehicle. These technologies, services and experiences will, in turn, need to be fully integrated with the technology and services which the users of the driverless vehicle are using at home and at work. In addition, each sale will become far more personalised.
  • Dealers will need to develop the capabilities to sell technology rather than vehicles whilst an increasing proportion of the value of a driverless car will be linked to the value of the technology licences which the user opts to “purchase” or “subscribe to use” with the vehicle. Some of this technology will integral to the base functionality of the vehicle whilst other technology will relate to services which the users wish to be able to experience whilst using the vehicle.
  • Many of these services will be software and/or content related and will be personal to the individual user. In this latter category, the underlying licences are unlikely to be transferable at the time of any resale of the vehicle. Alternatively, if the licence is to be transferable, the original content owner may demand a higher initial licence fee which will make the initial price of the vehicle much higher. Assuming that these licences are to be time limited and non-transferable, these licence have no residual value. If this is the case, the element of the total vehicle cost which relates to such services cannot be funded via asset based vehicle finance. Rather, it will be unsecured higher rate finance or the dealer should simply sell subscriptions on behalf of the content owner on the basis that the service provider pays the dealer a commission for each contract which is sold by the dealer.

Secondly, it is expected that driverless vehicles will be offered for sale with other public transport services built into the overall package as manufacturers and dealers transform themselves into being providers of mobility services. Again, these services will be specific to the individual consumer and will not be easy to sell on if the customer wishes to trade the vehicle in before the expiry of the original loan term. In theory, the costs of cancelling such services early could be recovered from the user by the finance provider by way of an early termination fee (assuming that the customer can be forced to pay), but this will by no means be certain. Accordingly, finance companies should not get involved in funding the cost of these options and the dealer should simply sell subscriptions to such services.

Thirdly, it will be possible for manufacturers, dealers, finance companies and other service providers to offer driverless vehicles “for sale” alongside a personalised technology and public transport package on a rental or subscription basis. In so doing, instead of entering into a fixed term finance contract, the user pays a fixed and/or usage related monthly cost to the service provider whilst the service provider will then need to fund the original cost of the vehicles over a contract period less. This could look similar to a traditional lease.

Fourthly, it is expected that many users of driverless vehicles will become interested in sharing the use of the vehicle with other users. This may take many forms. For example:

- instead of buying a vehicle, users contract with a car sharing service provider such as Car2go or Zipcar to use one of their vehicles at specific times

- apps are being developed whereby vehicle owners can make their own vehicles available for use by others on an “AirBnB” basis (although this will breach many finance contracts as hire is prohibited)

- driverless vehicles can be made available on a shared basis to multiple users on the basis of pay as you go or subscription pricing models – this could work with traditional finance if the user group was known at the outset of the contract. However, this model is expected to work best where the service provider manages a fleet of vehicles for use by its customers in much the same way as vehicle hire companies operate save that there will be no need to visit the car hire company to collect and return the vehicle – in the driverless world, the vehicle will bring itself to the customer and will take itself back at the end of each use

- subscription models can be developed whereby users can select different vehicle types depending on their needs on a particular day. Examples of this model, such as BMW’s Drive Now, are already available and many variants of this model are likely to evolve with variants backed by many different service providers alongside traditional manufacturers and dealers

However, in the fourth category, traditional consumer finance is unlikely to feature. Rather, whoever is funding the vehicle fleets which will be made available on a shared basis will need business finance.

The big question in all of this is whether the millenials acceptance of sharing experiences rather than owning will start to reduce consumer demand to own a vehicle which will conveniently be sitting outside its owners home for use exactly when the customer wants to use their chosen vehicle. Much will depend on the practical convenience of the shared user models. Given that driverless vehicles are, in terms of the experiences and services that they offer, likely to be highly customised, a strong market for privately owned vehicles is likely to continue. However, as this will not be the only way that consumers can purchase mobility, manufacturers, dealers and finance providers will need to react with new offerings.

The retail experience of the future

Technology has already started to revolutionise the retail experience, particularly in relation to omni-channel and virtualisation. In all of this, the business of selling vehicles has been slow to react. However, this is now changing.

Dealers now need to invest in highly trained staff who can demonstrate and support all of the technology which is and will embed into tomorrow’s connected and driverless vehicles and how such vehicles can be personalised to each user’s requirements.

Customers are also now looking for much more of an omni-channel approach to the sale of vehicles where all of the touch points between the manufacturer, the dealer and the customer are integrated, whether this be online, via smart phone and tablet, in the dealership or with the manufacturer. In all of this, online vehicle configurators and augmented and virtual reality demonstrations of the actual vehicles will dramatically affect the ways in which consumers expect to interact with the manufacturer and the dealers as the whole process moves online. For example, one of the more radical changes will be the ability to experience how it might feel to drive a vehicle of choice, fully specified with optional features, along a selection of roads. In so doing, consumers can feel the difference between one handling package and another, but all in virtual reality, before selecting their ideal vehicle.

In addition, through technology, the whole process of obtaining finance and insurance quotes can be more fully integrated into a seamless buying experience which, in turn, allows the customer to better manage their relationship with the finance provider through the term of the finance. Here, the virtual reality dealership is not far away.

Also, competition is set to increase from all manner of providers of mobility services whilst some manufacturers are also looking at selling direct to customers, whether online or via new more virtualised formats in shopping centre locations where there may well be no actual vehicles to see or drive.

In all of this, vehicle dealers will need to invest in technology. Dealers also need to recognise that they will be collecting significantly more data about their customers and their use of vehicles. Whilst this will present significant commercial opportunities, dealers will need to become trusted stewards of their customers personal data whilst, at the same time, driving customer loyalty and profits through closer relationships.


Data is at the heart of how connected and driverless vehicles operate. Here, the many sensors and communications devices which are being built into connected and driverless vehicles collect, store and share vast amounts of data about driving conditions, the performance of the vehicle, the way in which the vehicle is used, its journeys, its location, its occupants and so on.

All of this data is then analysed using predictive data analytics and artificial intelligence so as to enable each vehicle to communicate with other vehicles and the environment through which they are travelling. In addition, OEM’s, component suppliers and many third parties are looking to use this data to offer a wide range of personalised services to the users of connected and driverless vehicles.

However, the users of connected and driverless vehicles will have different views as to all of the potential uses of their data, particularly where many of the potential uses will go well beyond what is needed for a connected or driverless vehicle to be able to operate safely on the road.

Just because a company has invested time and money to create systems to collect and process data does not mean that it can do as it likes with the data. Whilst it may “own” the data which it has collected in the strict sense, it cannot process data which is “personal data” without ensuring that such processing complies with the requirements of data protection legislation.

Thus, it is necessary to stop and consider the legal requirements around the processing of personal data when designing vehicles and the services that will be offered to users of driverless vehicles. Regulators will also need to take a sensible approach to interpreting and enforcing those laws if they are not to stifle the development and roll out of driverless vehicles.

Here, it is important to realise the wide ranging scope of personal data as it includes any data from which it is possible to identify a living individual (whether on its own or when combined with other information in the possession of the relevant party). From this, it is clear that much of the data that is collected by vehicle manufacturers regarding how, where and by whom their vehicles are being used (as opposed to purely technical data) will be regarded as personal data. This, in turn, means that such personal data can only be processed if at least one of a defined list of permitted “conditions for processing” have been satisfied (and further conditions must be satisfied if the personal data is “sensitive”). The key condition is that the processing is necessary in relation to a contract which the individual has entered into or to enable the individual to enter into a contract.

It is also important to note that data protection law is changing across the European Union (including in the UK) with the adaptation to the so called “General Data Protection Regulation” (“GDPR”)f. This will come into force before the UK leaves the EU and is set to introduce a much tougher regulatory environment in relation to the protection of personal data including new requirements in relation to processing, ensuring privacy by design and making the whole process of obtaining consent much tougher. All of this means that OEM’s and dealers will need to pay careful attention to data protection laws as driverless vehicles are developed and made available to the public.