As automotive consumers struggle to find a vehicle at a reasonable price, automotive financing gets easier.
“Availability of funds is higher now,” Andy Mayers, lending solutions strategist for Cox Automotive, told Wards Auto. “It’s easier for people to get credit.”
He added, “The higher prices haven’t affected the availability of credit,” Mayers.
Though loans are plentiful, the product shortage has stilled auto sales making fewer auto loans necessary. However, when loans do occur, the amount of money consumers finance is higher than before. What might have been a $34,000 loan before is now a $43,000 loan, Mayers reports.
Mayers also reports credit unions are capturing more business than automaker’s finance groups.
Mayers also tracks lending trends pertaining to technology. He notes that through technology lenders can respond to credit applications quicker and provide a menu of term options based on different deal structures, such as downpayment amount or loan-to-value.
Technology allows lenders to return multiple decisions, Mayer said. And if the terms change, the consumer doesn’t need to resubmit loan applications.
Online auto shoppers now can upload and send loan stipulations such as a driver’s license, proof of employment and W-2 forms into lender systems.
Technology also helps lenders verify stipulation information, such as income. It can match the demographics, such as job-related income levels for people living in specific geographical areas, Mayer says. This capability makes it harder for people to exaggerate or under-report earnings on a credit application.
Digital auto retailing is another trend, Mayer cited.
Cox Automotive reports its data indicates dealers offering flexible digital experiences are five times more likely to get a shopper’s lead submission, experience a 46% higher close rate than from other lead sources, and earn 24% higher gross profit per deal.
A Cox Automotive study also finds consumer satisfaction with car buying has increased with digitization, reaching an all-time high of 72% in 2021, up from 60% in 2019.
Mayers predicts a day when buying vehicles completely online becomes commonplace. Several Cox Automotive units, such as Dealertrack, are working toward that.