The motor finance and leasing market is taking a leaf out of the mortgage industry’s book by increasingly moving towards a ‘finance first’ approach. Consequently, affordability is determined during the customer’s journey and ahead of the actual point of purchase.

Capita have recognised that differing key industries take on different approaches to their consumers. And there’s something to be learned from each of them to apply to your own sector. What does Capita say when it comes to the finance industry looking at vehicle affordability?

What is motor finance affordability and why is it important?

A car is most people’s second biggest purchase. When we go to buy a house (which is, of course, the first largest purchase), our mortgage is typically agreed in advance – ‘approval in principle’. So why shouldn’t the motor industry move more towards ‘lease/finance approved in principle’ before its customers go vehicle shopping?

Macroeconomic conditions are creating a challenging period for the motor finance and leasing sector, which is still in recovery following the pandemic. Interest and APR rates are rising, and with higher insurance, fuel and energy prices, car ownership is costly. 

Nevertheless, the outlook is more positive, with supply chain disruption easing, vehicle prices trending down and inflation levels improving. Demand for new vehicles is still there, but renewal conversations for like-for-like replacement cars that cost far more a month are becoming difficult. Many are downsizing to smaller and less prestigious vehicles. The motor finance journey is evolving at pace, adapting to rising expectations of customer experience and digital innovation, as well as shifting attitudes towards ownership.

Most new cars are purchased using finance agreements. Yet the existing motor finance and leasing customer journey typically assumes that a product choice has been made before applying finance to it. And many buyers would like to find finance options on their own terms, before they arrive at the dealership. But does the motor finance and leasing market facilitate this?

Thinking of financing early on 

A shift is occurring within the market. Progressive providers are taking a ‘finance first’ approach that establishes affordability early in the customer journey, enabling consumers to arrange their finance before they choose their vehicle, rather than at the point of sale.

This is significant for CX because finance has historically been perceived as an end-of-process step, increasing pressure on the customer regarding what they can afford. And car brands are historically product-led, rather than by finance or affordability.

Any yet many motor finance firms fail to sufficiently explore customers’ specific circumstances, which means repayment agreements often end up being unsustainable. And more UK drivers with cars over 10 years are hanging on to an old car rather than upgrading it – wouldn’t more awareness of car finance options help them to broaden their choice?

Features and flexibility at the forefront 

Affordability is in flux and the options for owning or accessing a car have become more varied and complex to navigate. While there will always be customers who are brand and product led, there is perhaps an opportunity for manufacturers to cannibalise other brands. They can expand their own customer bases by providing a finance first option. 

Consumers are seeking features that will support them in times of financial hardship. And with pandemic-influenced lifestyle changes, economic uncertainty and the cost-of-living crisis, coupled with increasing expectations of customer empowerment and experience, consumers value flexibility in their car finance products more highly.

The trend for establishing affordability early on in the customer journey is shaping expectations for greater levels of control and flexibility on demand. And it is indeed extending to car finance management. Consumers are increasingly looking for the ability to adjust and update aspects of their finance arrangements. Such as those related to contracted mileage or to obtain a settlement quote. 

Bringing in digital tools

Digital innovation and self-service tools can help give the consumer better CX and the control they crave. 

Financial providers must recognise the significant changes in lifestyle and work which mean that current contracts can feel inflexible and outdated. Thus the need for digital innovation and tools that put the customer in control and provide easy ways of amending finance. 

There’s a real opportunity here for the motor finance and leasing industry to develop ultra convenient, flexible ways for consumers to manage their needs. Doing this has the chance of:

  1. Reducing financial worry and avoiding overage penalties
  2. running a smooth and empathic experience, helping customers with finance agreement in principle, in advance of purchase
  3. agreeing affordability in advance to manage expectations and help to reduce future debt challenges. 

Further, generative AI based conversational agents could also be offered to digitise and automate a large part of enquiry-based customer support. Especially regarding the details of a finance arrangement.

Providers could also offer a more cohesive customer support team. One that has the necessary vehicle and brand information, but also the financial permissions required to address any questions in that area. 

And so, the industry could leverage how most new cars are purchased using finance agreements and change the perception that finance is just an end-of-process step. Instead, making car finance affordability led right from the beginning. This would also be a great opportunity to engage with the customer from the outset with supportive messaging.


Capita has published a series of reports on key industries to understand more about customers – including how businesses can best connect, support and transform their CX. Check it out today for more information.

This article was written by Capita, in partnership with CXM.

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