Car consumers at the moment may find it difficult to find the vehicle they want at a decent price amid a lack of inventory. However, obtaining auto financing is difficult for most people today.
“The availability of funds is higher now,” said Andy Mayers, whose duties at Cox Automotive include the company’s lender solutions strategy service. “It’s easier for people to get credit.”
This is somewhat reassuring for today’s car consumers in the stock market facing stock shortages caused by a global shortage of microchips. As a result, automakers are cutting back on production and dealers are raising prices as demand exceeds supply.
“Higher prices have not affected the availability of credit,” Mayers said (image, bottom left) says WardsAuto.
Because product shortages have hampered vehicle sales, there are fewer car loans these days. But the amount of money borrowed is usually higher than before, “a $ 43,000 loan versus a $ 34,000 loan,” Mayers cites as an example.
The rarity of dealership stocks has hit the auto industry more than any other lender. “It was negative for the prisoners,” Mayers said. Credit unions, on the other hand, “capture more business.”
His work involves monitoring lending trends, especially as technology plays a larger role in the credit-based car market.
For example, technology now allows lenders to respond to a loan application by providing a “menu” of term options depending on different agreement structure scenarios, such as down payment and value loan or how much money a car buyer wants for a down payment. of the vehicle.
“Lenders now have the ability to repay multiple decisions,” says Mayers. “It’s basically a ‘grid’ and eliminates the need to” re-apply for a loan “if the original submission requires modification.
“If someone changes terms, you do not have to refill,” he says. “It benefits everyone – the consumer, the trader and the lender.”
Another digital trend reported by Mayers: Online car buyers can now easily upload and submit so-called loan terms such as driver’s license, proof of employment and W-2 forms.
It is not particularly difficult to counterfeit a payment executive, but technology allows lenders to better verify term information such as income.
“Let’s say someone applying for a loan is a truck driver living in a specific area,” says Mayers. “Technology can match demographics, such as work-related income levels for people living in specific geographical areas.”
When applying for a car loan, some people exaggerate their income and job titles to increase their chances of getting credit. The world of auto finance is full of stories about it, like a cook claiming to be a chef.
Conversely, many consumers tend to point to their profits, especially if they are in higher income groups, says Mayers. Their thought is, “That’s enough information to give.”
Another trend Mayers is noting is the overall growing popularity of digital car retail. He gained traction during the peak of the COVID pandemic.
Cox Automotive says its data shows that dealers who offer flexible digital experiences are five times more likely to receive a potential customer submission, experience a 46% higher closure rate than other potential customer sources, and earn a 24% higher gross profit per agreement.
Consumer satisfaction with the car market increased with digitization, reaching a record high of 72% in 2021, from 60% in 2019, according to a study by Cox Automotive.
Most car consumers follow a hybrid approach that consists of both online shopping and in-store visits.
But Mayers predicts a day when A-to-Z online car shopping, including digital contracts, will become commonplace. He notes that several Cox Automotive units, such as Dealertrack, are working towards this.
It includes what he calls a “disappearance” lending process. “This means that everything is fine and all the work is completed when the contract package is received.”
Comparing full digital car retailing and lending with autonomous vehicle development, he says, “We are not yet at level 5,” the industry-defined point at which a vehicle drives completely on its own.
Steve Finlay is a retired senior WardsAuto editor. It can be accessed at [email protected].