When it comes to personal transportation, consumers are gradually preferring 'Usership' compared to 'Ownership' of cars. As a result, the dynamic choice of vehicles tends to make customers more demanding. This leads to an important area in the auto lifecycle that is the closure / renewal of the end-of-term lease. In 2019-20, the number of vehicles leasing across the industry is expected to reach 4.1 million, as per Jonathan Smoke, Cox Automotive’s chief economist. The focus of dealers and lenders will be on connecting these returning vehicles with existing customers or new customers or fintech players, back to the market. In terms of how to handle this incoming collection of cars, the challenge for dealers and lenders are twofold:

1. Time consuming and error prone grounding process for car
2. Lack of traceability of every car and where it stands as part of end of term process

Seamless grounding of vehicles

The current industry process of termination of a lease contract is time intensive where it is the responsibility of the customer to understand the residual equity in the vehicle, penalty costs for excess distance covered, physical damages such as dents, scratches, etc. beyond agreed terms as part of contract. In addition, the process of grounding is stressful for the customers due to disputes on mismatch between grounding assessment by dealer and then later by auction house. This process needs to be simple wherein the customer can assess the potential damages on their own with the help of augmented reality technology supported with visual analytics. The customer should be able to understand the potential penalties with respect to the cost breakup associated with damages. The customer can then choose either to pay the penalties or customer can fix the damages on their own and deliver the vehicle for grounding. Visual analytics and augmented reality technology can also assist the dealers or the inspection agency and can help reduce the time spent by dealers on assessment. Faster and seamless grounding process can help improve customer experience effectively.

Digital platform to streamline End of Term process

Currently the different stages of End of Term such as grounding, inventory management at dealer, dealer auction, inspection at auction houses, auction processing, proceeds management from auction, etc. is handled in silos and lenders do not have visibility into the end-to-end process. Lenders can leverage digital platform to simplify and gain visibility into the end-to-end process of the End of Term. There is a need for lenders to be able to track every vehicle that is returning and at what stage of the end of term. Lenders are now increasing their partnership with fintech companies, which are into subscription business model. Having visibility into the end of term can help lenders identify and maximize revenue streams in terms of whether the vehicles should be sent to the auction houses or can be leveraged by the fintech partners. Lenders can also identify potential bottlenecks in the end of term process with the aim to reduce costs and improve process efficiencies.

Technology to Bridge the Customer Experience

Auto Financiers will need to assess the internal technology stack with respect to kind of customer/ dealer experience that they are looking to deliver. Auto Financiers can leverage AI and analytics to digitize the End of Term processes like Vehicle verification, Condition Check and Odometer Reading. Auto Financiers can leverage information from external service providers such as auction houses, inspection service agencies to build the complete ecosystem, which can support an end-to-end digital customer experience. Auto Financiers can leverage their internal customer relationship management (CRM) application for building persona definition and identifying which are the next best auto models that customers are likely to opt based on varying and changing lifestyle capturing the customer increasing social preferences.

Auto Financiers can also enable a self-service digital channel in the form of mobile application wherein customer can assess the damage incurred before vehicle grounding. A Real time post-Inspection reporting powered by image reading and AI techniques will reduce the manual efforts and cut down on the multiple communication exchange between Dealer and Customers. This will enable seamless closure process giving the best customer experience for improving chance of re-finance or returning customers in future.

The Way Forward

The potential of AI and analytics in end of term is immense and Auto Financiers are looking at different use cases for implementation.  AI-powered solutions can potentially transform the way customers and dealers view the end of term and ultimately help Auto Financiers to improve customer experience and create exponential value.