While finance is readily available at POS for the purchase of a vehicle, those looking to pay for a service in instalments are, as a general rule, not nearly as well served. Jonathan Minter speaks to Christer Holloman, CEO and co-founder of Divido, to find out how he is looking to change this
Divido offers the automotive world a simple-sounding product: the ability to offer finance on the aftersales requirements of consumers, such as repairs and services, at garages and dealerships.
Entering last year’s BMW Innovation lab as an intermediary between its lending panel and retailers, Divido now operates at over 60 BMW retailers nationwide. Motor Finance spoke with chief executive officer and co-founder Christer Holloman to find out how this is progressing.
MF: Tell me a little about what you offer.
CH: We have one solution and platform that we offer to all our retailers, and there are three things that make that platform unique. Divido is omnichannel. The finance solution is not available just in a physical retail space, like a dealer; it also works on a website and on telesales. So regardless of where the customer chooses to interact with a car company, if they want to finance, we have a platform that allows the customer to apply and get credit.
Our second USP is we’re a multi-lender. We have several lenders on our panel, which means they’re all competing for business, which drives down the cost of the credit, and drives up the number of customers being accepted. That’s something garages, dealers and retailers really like, and it’s also something consumers really like.
You offer 0% finance in a lot of cases. Is there one lender that offers that?
We have curated a panel of multiple lenders. We work with the manufacturers and car dealers to understand what they’d like to offer, and based on what they’re interested in – be it interest-free or interest-bearing – we’ll get the best quote from the market place.
One thing to mention here is that some automotive companies will have their own financing arms. They can choose to be on the panel or choose to outsource the lending to the panel. So BMW may wish to test the market by letting other lenders lend to the customers in the pilot stage.
And as and when they think this a big enough of an opportunity, they can become a lender on the panel. And they’ll have the power to decide if they should be the only lender on the panel, or if they like the idea of having multiple lenders to drive up accept rates. It’s completely flexible to the finance company.
What did you learn in the Innovation Lab?
This brings me onto the third unique point. Divido is multi-country. We integrate with dealers or retailers, and the solution will work in all the markets and countries they’re in. BMW being a global brand has given us a fantastic experience to learn and work with a big multinational automotive manufacturer. That’s been the single biggest takeaway. For a young, fast-growing business, the opportunity to learn how to navigate, network and build relationships with a big multinational has been tremendously rewarding.
How did operating in a dealership differ from operating in other markets?
The main difference is that garages and retail dealers produce quotes for customers. They say “you could spend £4,000 on all these things, or £3,500 on these”, so very often the customer is presented with a shopping list of alternatives, and they are asked what they would like to go ahead and buy.
That’s where finance works really well. Customers might think it’s expensive to buy all of the recommended repairs, but when it becomes easy to spread the costs interest-free for 12 months, it becomes more palatable. Whereas in the traditional retail world, the customer comes in, says “that’s what I want” and that’s typically the end of that journey, with the finance offered for that product.
What are you financing in dealerships?
We started with financing services, but we’re signing up to bodyworks and insurance excess fees. Accessories are also on the radar, but that’s not something we’re pushing at the moment.
Why has something like this not been offered by or for dealers before?
I think the importance of finance has always been focused around financing the vehicle. Increasingly there has been an awareness of customer perceptions, improving the experience and managing ownership of the lifetime of the vehicle. Businesses are becoming much more customer-centric. I think it’s this increased customer-centricity which is driving this.
Also, with consumer confidence flatlining a little with everything going on in the world, anyone selling expensive things needs to work harder to make it easier for customers to spread costs and manage unexpected bills.
Another thing is that we’re seeing an increase in used car sales, so there are going to be more older cars on the road, more cars coming into the service station, and therefore more quotes to be produced, probably. We need to be clever in how we increase the conversion from giving a quote and making the repair work. So increasing the utilisation of the workshop is kind of our goal.
What is the most popular product for you?
Around 90% of our orders are for interest-free, 0% APR. That’s carried over to dealers as well. BMW do six and 12 months interest-free. That probably makes the most sense to the customer, and is the most convenient way for a customer to say yes to a quote.
You spoke about being an international company. How far along are you in international expansion?
Divido started trading 18 months ago in the UK, and this year we’re launching in eight new countries across Europe. We’ve signed up for multinational exclusive contracts with brands like HTC, Lenovo and Motorola, so mostly consumer electronics so far. I can’t comment on the stage we’re at with BMW beyond the UK.
What other considerations are there?
There are three reasons our dealers use POS finance: It helps them attract more customers by broadening the addressable market; it greatly increases average order values; and it also improves conversion rates.
I think this will become a hygiene factor. When a critical mass of garages are offering finances, the others are going to have to offer that as well; it will become expected.<