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Consumer Automotive Financial Services in Australia

  • September 2015
  • -
  • Finaccord
  • -
  • 60 pages

Consumer Automotive Financial Services in Australia investigates the market for automotive financial services linked to sales of new and used passenger cars to individual buyers in Australia. In addition to analysing the market for finance and leasing services, the study also covers creditor insurance, motor insurance, road assistance, extended warranties, GAP insurance, tyre and rim insurance, and prepaid service contracts.

Using survey results for average take-up rates for finance and leasing propositions at the point of sale, data for the size and growth of the automotive finance and leasing market for consumers in Australia is provided in terms of gross advances and assets leased for 2011 to 2015 with splits between finance for new and used cars and between finance organised through dealerships at the point of sale and directly with banks or other lending institutions.

Moreover, also by means of data for average take-up rates, the markets for creditor insurance, motor insurance, road assistance, extended warranties, GAP insurance, tyre and rim insurance are sized in terms of gross written premiums and other revenues sold through the automotive trade (i.e. via dealers and manufacturers) in 2012. These markets, estimated to be worth AUD 1.81 billion (about USD 1.27 billion) in total in 2015, are broken down between new and used cars and between new contracts sold during 2015 and in-force business sold in previous years but still being renewed in 2015.

The report draws on a survey of 65 leading car dealerships as well as an analysis of the approach to consumer automotive financial services of 40 car manufacturer brands in Australia. The PartnerBASE™ dataset that accompanies the report details each of the marketing initiatives for consumer automotive financial services traced by Finaccord for both dealers and manufacturers.

In addition to captive finance companies owned by manufacturer brands, organisations covered by the report include Aioi Nissay Dowa Insurance, Allianz Australia Insurance, Assist Australia, Australian Warranty Network, Digicall Assist, Esanda, Harrier National, Macquarie Leasing, QBE, St George, Suncorp Insurance and Swann Insurance. Together, the report and database will provide you with the definitive guide to current and future opportunities in consumer automotive financial services in Australia.

Table Of Contents

Consumer Automotive Financial Services in Australia
TABLE OF CONTENTS
00 EXECUTIVE SUMMARY 1
10 INTRODUCTION 3
What is this report about? 3
The focus of the report is on financial services related to the sale of passenger cars to individuals 3
Rationale 3
The provision of financial services is essential to support both car sales and profitability 3
This report offers a detailed and updated analysis of the subject in Australia based on primary research 3
Methodology 3
Survey of dealers and manufacturers 3
Market data 5
Computation of market data is based on a complex set of assumptions and variables… 5
…in order to provide market segmentations in unrivalled detail 5
External sources 6
Definitions 6
Finance and leasing products 6
Insurance, warranty and assistance products 7
Operating models 8
Tied and non-tied providers 8
Abbreviations 8
Exchange rate 8
PartnerBASE and market data annexe 9
Finaccord 9
20 MARKET ANALYSIS 11
Introduction 11
Passenger vehicle data 11
Sales of both new and used passenger cars hit a five-year high point in 2015 11
No single manufacturer group takes a share of more than 20% of the new light vehicle market 13
Consumer automotive finance and leasing market 14
Market size and growth 14
Used cars make up the majority of the finance and leasing market by volume 14
with the total market value having risen at a compound annual rate of 45% between 2011 and 2015 15
Types of finance and leasing product 17
Finance and leasing products other than simple car loans make up nearly 40% of all contracts… 17
… with finance leases having become significantly more popular in recent years 17
Consumer automotive insurance, warranty and assistance markets 18
Market sizes 18
The total value of insurance, warranty and assistance products sold by the automotive trade is significant 18
Survey of automotive dealers and manufacturer brands - overview 21
Introduction 21
Provision of consumer automotive financial services 21
Six types of automotive financial services are offered by over 90% of dealerships 21
Dealer provision rates are generally ahead of those for manufacturer brands 21
Number and nature of dealer schemes 23
Dealers typically work with two providers for finance and leasing 23
Types of creditor insurance policy sold by dealers 25

Creditor insurance policies in the automotive sector always comprise comprehensive cover… 25
Types of motor insurance policy sold by dealers 26
… and a similar observation can be made for motor insurance 26
Sources of road assistance distributed by dealers 27
Road assistance is always bundled with extended warranties and sometimes with other services 27
Consumer uptake of automotive financial services through dealers 28
Take-up rates exceed 20% of the relevant audience for the majority of automotive finance products 28
… and are especially advanced for GAP insurance 28
Buyers of used cars record higher take-up rates than buyers of new cars for several products 28
Survey of automotive dealers and manufacturer brands - partnerships 30
Introduction 30
Finance and leasing 31
St George Bank and Esanda dominate non-tied finance relationships with dealers in Australia 31
although competition comes from at least six smaller non-tied providers of finance and leasing… 31
including two finance brokers 31
30 brands have a captive or preferred provider in this field 33
with St George Bank and Macquarie Leasing emerging as the leading external finance partners 33
In the combined analysis, five providers are found likely to control over three quarters of the market 35
Creditor insurance 36
There are four underwriting units competing for direct relationships… 36
… albeit Allianz is clearly the dominant player 36
Motor insurance 38
Eight non-tied providers are identifiable in this sector 38
Allianz Australia Insurance is linked directly or indirectly to as many as 15 brands… 40
… making it the dominant competitor in this sector too 42
GAP insurance 43
Five non-tied providers compete in the GAP insurance market… 43
… and four have established partnerships with manufacturer brands 45
Extended warranties 47
By share of non-tied dealer relationships, Harrier National is ranked first… 47
… having apparently overtaken its two main rivals by this measure 47
Manufacturer brand extended warranties are quite often organised on an internal basis… 49
… albeit two external providers account for more than 50% of the market in the combined analysis 51
Road assistance 52
Several dealers offer road assistance from non-tied providers… 52
Assist Australia leads among manufacturer brands, followed by AGA Assistance Australia… 54
… albeit they may face competition from new market entrant Digicall Assist in future 54
Prepaid service contracts 56
Dealer provision rates for prepaid service contracts have increased… 56
… albeit availability of capped price services programs is one reason for their limited development 56
Tyre and rim insurance 59
Tyre and rim insurance is still available from a majority of dealers… 59
and from a significant minority of manufacturer brands 59

LIST OF GRAPHICS / TABLES

00 EXECUTIVE SUMMARY 1
Key market data for consumer automotive financial services in Australia, 2015 2
10 INTRODUCTION 3
20 MARKET ANALYSIS 11
Passenger car parc and new / used passenger car sales in Australia, 2011 to 2015 12
Passenger car parc and new / used passenger car sales in Australia, 2011 to 2015 (table) 12
New light vehicle registrations in Australia, segmented by manufacturer group, 2014 13
New and used passenger car finance market in Australia, segmented by distribution channel: volumes, 2011 to 2015 14
New and used passenger car finance market in Australia, segmented by distribution channel: values, 2011 to 2015 15
New and used passenger car finance market in Australia, segmented by distribution channel: values and volumes, 2011 to 2015 (table) 16
% split between the different types of finance and leasing contract organised at the point of sale in Australia, 2015 17
Total revenues from consumer automotive insurance, warranty, assistance and service contract markets in Australia, 2015 19
Total revenues from consumer automotive insurance, warranty assistance and service contracts in Australia, 2015 (table) 20
Comparison of the provision of each type of automotive financial service by dealers and manufacturer brands in Australia, 2014 22
Average number of tied and non-tied schemes organised by dealers for each type of automotive financial service in Australia, 2015 (table) 23
Average number of tied and non-tied schemes organised by dealers for each type of automotive financial service in Australia, 2015 24
% split between the different types of creditor insurance policy sold at the point of sale in Australia, 2015 25
% split between the different types of motor insurance policy sold at the point of sale in Australia, 2015 26
% availability of road assistance through factory warranties, annual services, extended warranties, motor insurance, prepaid service contracts and as a stand-alone product in Australia, 2015 27
% of new and used car purchasers acquiring each type of automotive financial service at the point of sale in Australia, 2015 29
Provision of finance and leasing by dealers in Australia, 2015: provision rate, product sources and provider share of non-tied partnerships 32
Provision of finance and leasing by manufacturer brands in Australia, 2015: provision rate, operating models and weighted provider share of partnerships 34
Implied market shares of new business for finance and leasing at the point of sale in Australia, 2015 35
Provision of creditor insurance by manufacturer brands in Australia, 2015: provision rate, operating models and weighted provider share of partnerships 37
Provision of motor insurance by dealers in Australia, 2015: provision rate, product sources and provider share of non-tied partnerships 39
Provision of motor insurance by manufacturer brands in Australia, 2015: provision rate, operating models and weighted provider share of partnerships 41
Implied market shares of new business for manufacturer-branded and dealer-intermediated motor insurance in Australia, 2015 42
Provision of GAP insurance by dealers in Australia, 2015: provision rate, product sources and provider share of non-tied partnerships 44
Provision of GAP insurance by manufacturer brands in Australia, 2015: provision rate, operating models and weighted provider share of partnerships 46
Provision of extended warranties by dealers in Australia, 2015: provision rate, product sources and provider share of non-tied partnerships 48
Provision of extended warranties by manufacturer brands in Australia, 2015: provision rate, operating models and weighted provider share of partnerships 50
Implied market shares of new business for extended warranties at the point of sale in Australia, 2015 51
Provision of road assistance by dealers in Australia, 2015: provision rate, product sources and provider share of non-tied partnerships 53
Provision of road assistance by manufacturer brands in Australia, 2015: provision rate, operating models and weighted provider share of partnerships 55
Provision of prepaid service contracts by dealers in Australia, 2015: provision rate, product sources and provider share of non-tied partnerships 57
Provision of prepaid service contracts by manufacturer brands in Australia, 2015: provision rate, operating models and weighted provider share of partnerships 58
Provision of tyre and rim insurance by dealers in Australia, 2015: provision rate, product sources and provider share of non-tied partnerships 60
Provision of tyre insurance by manufacturer brands in Australia, 2015: provision rate, operating models and weighted provider share of partnerships 60

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