Digitalisation and fuel efficiency

Maximising business as usual growth in our established product areas is a core part of achieving our strategic vision. Heartland Bank’s Motor lending portfolio, which includes Car Loans , is an example of an area in which we have seen consistent growth while supporting our dealership and branded partners to grow their businesses, and helping New Zealanders to get behind the wheel.

In the financial year ended 30 June 2022 (FY2022), Motor saw gross finance receivables increase from $1.3 billion in the financial year ended 30 June 2021 (FY2021) to $1.4 billion. This growth came despite the headwinds of COVID-19 and global supply chain disruption, and the unintended effects of changes to the New Zealand Credit Contracts and Consumer Finance Act 2003 and the Credit Contracts and Consumer Finance Regulations 2004 (CCCFA), introduced on 1 December 2021.

Growth through branded partnerships

Heartland Bank’s Motor portfolio includes lending direct to customers through Heartland Car Loans  or Marac , and lending through dealers, key partners and branded white label partnerships. Our key partners, including white label partnerships, are important contributors to the Motor book’s growth.

Key partners, including branded white label partners, contributed $293 million of total Motor new business in FY2022, up 2% on FY2021.These include partnerships with Peugeot and Citroen (through Auto Distributors New Zealand Limited (Auto Distributors) under the iOWN brand), Kia (through Kia Finance and offering Kia Konfidence), Jaguar and Land Rover.

Auto Distributors have also been appointed the distributors for German Car brand Opel, arriving late October 2022, with finance to be provided by Heartland Bank.

Through these partnerships, Heartland Bank provides white label finance to the brand which the vehicle distributor or brand offers through its dealerships. This gives the dealership access to our vehicle lending product suite, including Business Leasing, Operating Leases and Guaranteed Future Value (GFV) loans, along with typical vehicle term loans.

Strengthening these partnerships is mutually beneficial. Our digital platforms and finance solutions support growth for branded partners by providing New Zealanders with finance options to help them purchase their next vehicle. To aid ongoing growth, further digitalisation of dealer platforms is expected through the coming financial year.

Digitalising our vehicle lending platforms

We released the first stage of our online end-to-end platforms in the second quarter of FY2022. This allows customers to apply online anytime, anywhere with a decision possible in minutes – without needing to go into the dealership to apply for a loan. We will continue to develop these platforms to improve the customer experience and reduce friction.

This development will include integrating the origination platforms with our dealer management systems. For our dealership partners, this service will free them up from having to complete an application with the customer present. Customers will be able to complete the application from the comfort of their own home, in their own time, and feel confident about the amount of lending they can afford when choosing their next vehicle.

Lending for greener vehicles

The end-to-end dealer platforms we have developed for our partners allows them to provide their customers with a seamless vehicle purchase and finance experience, and offer a range of finance options including GFV loans. A GFV loan allows customers to have fixed regular repayments and assurance of the vehicle’s minimum value at the end of the term. This service has been particularly valuable for those looking to upgrade to new generation EV and hybrid technology.

We are committed to supporting our partnerships and customers in the clean energy transition to EV and hybrid vehicles. With our continued focus on sustainability, we are pleased to see the amount of lending in this area continue to grow. Lending for electric vehicles and hybrids now accounts for 5% of Motor lending, up from 1% in FY2021.

This growth is primarily through our partnerships with Kia, Peugeot and Citroen, who are seeing the share of these vehicles grow over internal combustion engine vehicles. Due to the Clean Car Discount, they have seen these cars make-up 40% of their sales. In late October 2022, Opel is expected to enter the market with a unique offering with German engineered, electrification across the range at an affordable price point – all models will be eligible for the Clean Car Discount.

Looking forward

As our partners increase their distribution of EV and hybrid vehicles, and supply chain constraints ease, we anticipate lending to new generation vehicles to grow significantly in the coming year.

Ongoing development of our digital platforms is expected to support this growth. We will continue to develop these platforms to ensure a frictionless customer experience, whether at the dealership or direct to customers online. The next key development we are working towards is to streamline the experience for customers applying via a mobile app. With these developments, more customers will be able to apply online and then self-service their loan by continuing to use an app – saving the customer time by reducing their need to wait in a queue or call.

To read more about how we’re digitalising our product platforms, and our commitment to sustainability, read Heartland Group Holdings Limited’s 2022 Annual Report .