The auto industry has been shifting, with consumers wanting an improved experience. Buyers are eager for alternatives to long days of painful dealer negotiation and limited financing options.
The car buyer today is well-informed. Research is done online, in advance, and dealers are no longer the only option. Moreover, dealer financing is no longer the only option. Trends in auto lending show an uptick in direct to consumer transactions that will only increase.
Lenders will want to get ahead of this change in the marketplace. Direct to consumer loans will increase as consumer behavior continues to evolve. What are the changes in auto buying, and what are the opportunities for lenders?
Car Buying Can Happen Online
Almost all forms of shopping have moved to a digital experience. Known as “the Amazon effect,” this has affected many brick-and-mortar industries, including the auto industry.
Potential car buyers can now shop online. They can buy cars and have them delivered to their home. They do not have to go through a negotiation process but can see a car and purchase it at the price listed.
Impacts of COVID-19
While these auto lending trends were already occurring, COVID-19 added even more fuel. As many car dealerships were forced to close and buyers wanted limited contact, online sales continued to increase. Potential car buyers that may have never before considered an online car purchase found themselves willing to look.
And while COVID-19 will be temporary, the changes in consumer car-buying habits will likely be permanent. Lenders will find new borrowers flooding the market looking for a direct loan to finance their online car purchase.
Consumers Want More Engagement
The desire for 24/7 access extends to financial transactions. Lenders can promote the ease of their online applications to draw in borrowers.
Lenders with effective loan origination solutions and loan management systems will be responsive to their borrowers, enhancing the overall customer experience. When borrowers engage in direct auto lending, they will expect a lender to meet them where they are (online), with expertise and exceptional service.
Lenders Can Control Products Sold
As lenders work directly with consumers on auto financing, they can offer additional products to have greater profitability from the transactions. Products such as GAP insurance and credit life and disability insurance can be offered through online channels so that borrowers can easily take advantage of them.
As lenders look to increase their direct auto lending, there are also opportunities for vehicle refinancing or other financial products. The overall relationship with the borrower may extend beyond the car loan to checking/savings accounts or other loans in the future.
Reacting Quickly to Auto Lending Trends
As the market continues to change rapidly, lenders can position themselves to grow their direct auto lending. Having the right loan solutions in place will position lenders for success.