Online sales and subscriptions will shape tomorrow’s car financing journey

Europe’s car market has upshifted from financing to leasing. This move should both endure and accelerate further, powered by the growing market share of electric vehicles (EVs). We also expect a shift in customer behavior regarding mobility patterns and auto financing, having asked more than 4,000 customers across Europe (France, Germany, and the United Kingdom) to reveal what they expect from the future of auto finance. We conducted this research as part of our regular McKinsey Mobility Consumer Pulse Survey, to reveal what customers expect from the future of auto finance.

Greater willingness to shift from offline to online

Based on our research, we believe the future of automotive retail will be digital and direct to consumer. Today, fewer than 3 percent of customers say they purchase vehicles fully online, but 29 percent of consumers indicate that they want to buy their next car entirely online. An additional 23 percent say they would like to order online but require some physical touchpoints (for example, a test drive) along the purchasing journey. Consumers also want more of a full-service experience, with all the complexities that arise from that for the industry, including the seamless integration of service and partner journeys in areas such as digital financing and insurance and the world-class online personalization. However, test drives remain a critical issue, as close to 90 percent of customers say they still would like to experience the car before they purchase, especially for first-time EV buyers.

Today’s car choice remains rooted in consumer budgets, not OEM brands

Unlike most digital shopping journeys, the search for a car doesn’t usually begin with online browsing. In our survey, more than half of respondents want to choose a monthly budget first; only one in five want to browse, and the vehicle brand is of even less importance in the consumer’s preferred buying journey (6 percent).

Vehicle subscription offerings gain importance

Mobility subscription offers provide access to selected vehicles against a monthly subscription fee. They are gaining relevance in the eyes of customers, with 33 percent of respondents open to trying a vehicle subscription in the future. Interest is not limited to young consumers, with millennials (39 percent) and Gen Xers (38 percent) showing the strongest interest in such offers. This result may be rooted in their relatively higher disposable income, among other factors. Currently, this interest primarily exists among more affluent customers, but it could signal the opportunity for making mobility accessible and more affordable for all consumers.

Customers prefer dealers and OEMs that offer subscriptions

Nearly 55 percent of respondents indicate that established OEMs are their most trusted providers for vehicle subscriptions across the premium and volume brand segments. Fewer than 20 percent of respondents trust automotive disruptor brands or each of the other groups of independent third-party players we asked about in this role. Those interested in trying vehicle subscriptions signal a willingness to pay approximately 10 percent more for the access flexibility compared with their current mobility expenditures.

Mastering online and subscription sets the baseline for future success

The future success of traditional OEMs, noncaptive leasing providers, and digital players will strongly align with becoming proficient at offering online and flexible ownership options. For traditional OEMs, the risk associated with not gaining this capability is significant. Two out of three respondents seeking a vehicle subscription say they would switch to another car brand if their preferred OEM didn’t offer subscriptions. Likewise, 42 percent of consumers who would consider buying their next car online say they would switch brands if their current brand didn’t offer a good online buying experience.

Although digital players in car financing have managed to secure a head start over the past few years, the race is not yet over. Who will get there first? Will OEMs be able to transform their traditional sales and distribution approaches before digital attackers manage to steal market share? Or will independent leasing providers jump in, leveraging well-run operations and good purchase conditions? The answer will likely shape Europe’s automotive financing market as the decade unfolds.