Web-based loan acquisition is already a key component of most automobile dealer and lender strategies. About 60% of the 22,000 automobile dealerships in North America, most major retail lenders, a half dozen Internet-only banks, and emerging vehicle and finance aggregators have Web sites that accept credit applications. Consumer demand for automobile finance over the Web, however, may be limited due to the importance and complexity of making an automobile purchase and contractual arrangements between automobile manufacturers and dealers. The nature of researching an automobile purchase online and shopping for rates through multiple contacts at multiple Web sites also serves to exaggerate the size of the market for Web-based automobile loan originations.
In this report we identify (1) the types of players in the space that have emerged and how their various interactions can be termed "coopertition" and (2) the major financial services institutions (FSIs) and dealer groups involved and their Web branding strategies. We also demonstrate what can be termed The Incredible Shrinking Web by tracing how tens of millions of automobile-related inquiries on the Web in 2000 will result in fewer than 200,000 automobile loans or leases booked online.
Additional Information
Highlights
The most optimistic estimates place online purchase requests for automobiles at 3–4% of the US Market. CarsDirect.com, for example, an aggressive online buying service, purchased fewer than 6,700 automobiles in 1999 on behalf of consumers, with first quarter 2000 volume barely topping 3,000. The dollar amount of all automobile sales initiated to some degree over the Web will barely exceed US$2 billion out of total new and used car sales of nearly $550 billion.
Millions of customer contacts, e-mails, and other inquiries that are often termed online automobile related purchases significantly overstate the number of loans eventually booked by lenders because of “coopertition” among multiple players on the Web.
In 2000, of the approximately 22 million applications for automobile credit that will be processed in North America, no more than 2% will come from consumers visiting various Web sites. That figure is not likely to grow to more than 10% of applications processed by 2002.
Thirty million inquiries about rates at lender Web sites are likely to produce only about 175,000 booked loans. A simple calculation is that L = H (.006), in which the number of automobile loans lenders will book through the Web (L) is equal to the number of Web site contacts or hits (H) inquiring about automobile terms and conditions multiplied by .006.
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