Before COVID-19 shelter-in-place orders necessitated digital sales and remote deliveries, Lithia Motors Inc. recognized the majority of its consumers struggled in digital environments. Consumers in positive equity positions with their trade-in vehicles and perfect credit scores are least likely to require assistance with the process, executives said.
The Medford, Ore., retailer said just one-fifth of its customer base can start and finish a deal online without intervention from a dealership employee. Automated processes embedded in digital processes may reject deals consumers put together themselves or lock them into contracts they may struggle to fulfill.
The majority “just don’t have the ability … to be able to understand the disequity in their car to get rid of their trade and then find a finance source that meets all of that criteria,” CEO Bryan DeBoer said. “That’s what Lithia Motors does; that’s what our 500-plus specialists in finance do.”
Negative equity and less-than-perfect credit scores present barriers for 80 percent of buyers at Lithia stores, executives said last week, emphasizing the need for specialized finance managers to maintain sales volumes. The average customer comes to market with $5,100 of negative equity to navigate, Lithia said.
Pandemic policies may be accelerating digital transactions, but complex financial situations require human intervention at some point. As showroom closures accelerate digital adoption, the retailer is focused on leveraging technology to break down barriers for consumers who want to buy online. Technology could remove some barriers from the process, DeBoer said, allowing consumers to get further into a digital process despite credit concerns.
“Our IT teams are starting to digitize and crack the code on that,” he said while adding that consumer desire for a fully digital transaction is a “misnomer.”
“I think it’s more about wanting to do it in the comfort of my own home,” DeBoer said.
Arranging financing for customers is a main profit driver at Lithia, executives said in previous quarters, and the retailer sees customers who need help transitioning to their next vehicle as an avenue for growth. Finance managers are essential to that end.
Digital retailing is a life raft for dealership sales during the COVID-19 crisis and likely will continue at higher volumes once shelter-in-place orders lift. But for car buyers with complex financial situations, dealerships will always need a person behind a desk, on the phone or online to step up on their customers’ behalf.