June 15, 2021

Customers with high FICO scores transact fully on digital retailing platforms

Lithia Motors Inc. and Asbury Automotive Group Inc. shared early learnings from their recently launched omnichannel retailing solutions in first-quarter earnings last month, with both retailers reporting that higher-credit consumers transacted entirely online and made larger down payments on expensive vehicles.

However, the inventory shortage may be driving more customers to transact online and pay more for scarce inventory, Asbury CEO David Hult warned last month.

In March, Asbury completed the rollout of its Clicklane omnichannel platform — which refers to offering a seamless buying experience to consumers whether they shop online, in-store or both — across all of its 91 dealerships.

The Duluth, Ga., retailer launched Clicklane in December as part of its five-year plan to reach $20 billion in annualized revenue by 2025, up from its current $8 billion in annual revenue. Clicklane will account for $5 billion of that revenue.

Current market conditions may be impacting what the dealership group is seeing on the tool, Hult said. Higher down payments are likely a reflection of government stimulus and tax refunds, he said.

Customers with lower credit scores are transacting through the tool, he told Automotive News, but many struggle without dealership intervention.

“If the whole thing is automated, I’m doing it on my own, I’m likely to get turned down,” he said.

Some details on those sales:

  • Average down payment was more than double the in-store average.
  • Finance-and-insurance per vehicle retailed profit was 17 percent higher than the dealership average.
  • Nearly half of customers took delivery at home.
  • Credit scores on average were higher than in dealerships.
  • 9 out of 10 customers who applied for a loan through Clicklane were approved.
  • Nearly half of transactions had a payoff with a vehicle trade.
  • Trades taken through Clicklane sold for higher end-to-end profit compared with trades from the dealerships.
  • Trades through Clicklane turned in less than 15 days.

Lithia is steadily rolling out Driveway across the country. Launched last July, the omnichannel platform reached several more markets in the first quarter.

Though the small portion of consumers going all the way through the Driveway platform have higher credit scores, executives were surprised by the volume of consumers entering the tool who required assistance pulling a deal together.

“We are seeing that the credit tier is a little more impaired and a little more challenging than what we expected, whereas originally we were thinking that the ideas of a 30 [vehicle average] per associate in the Care Center could be achievable,” Lithia CEO Bryan DeBoer said on an investor call April 21. “It still may be, but our early blend of technology with consumer decisioning is really yielding about a 12 [vehicle average] to every one Care associate.”

In addition:

  • Of all Driveway customers in the first quarter, 97.8 percent were new to the retailer.
  • A full transaction, including financing, took an average of 19 minutes through the site.
  • About 15 percent of all credit decisions are auto-approved.
  • Most consumers sought assistance from Lithia’s Driveway Care Center, staffed by dealership F&I managers, to structure their purchase.
  • 43 percent of Driveway sales were out of region.
  • The average shipping distance is 732 miles, with an average shipping fee of $477.