Auto lending and competing transportation options

We all know the automotive purchase and lending marketplaces have changed substantially, and we confront new competitors and additional changes every day. To drive auto lending sales, we must respond to market changes and customer demands. In our heavily regulated industry, keeping up with the marketplace can be even more challenging because we must stay in line with compliance requirements.

For years now, the average new car buyer turned over a down payment and financed the balance of the vehicle purchase price through an auto loan paid back (with interest) in monthly installments for a period of two to eight years. The average new car loan term these days is about 5.5 years. As these loan terms keep getting longer, we’re falling out of step with an increasing number of consumers who don’t wish to own a car that long.

Consider these groups of attractive buyers, who may find traditional auto loan terms too lengthy and unattractive:

• Active duty military who relocate frequently and are subject to overseas assignments
• Foreign students studying in the U.S. for a year or two
• U.S. college, graduate, and doctoral students who need a vehicle near school
• Assignment workers, such as contractors and TV/movie production workers
• Tech addicts who feel a constant need for vehicles with the latest gadgets

Unfortunately for those of us in the auto lending business, there are increasingly more options for consumers who don’t wish to be tied down by a traditional auto purchase and loan.

Options to share cars and rides

These days, it’s easier than ever for people to get away without even having a car of their own or paying the associated expenses.

• In exchange for a small membership fee and usage charges, consumers can drive a car owned by a willing owner or a car sharing service, such as peer-to-peer platform Getaround, Zipcar, or General Motors’ Maven.
• In most areas, consumers can inexpensively get rides anywhere they wish with services such as Uber or Lyft.

Options to find a shorter term ride

Consumers who need their own car but don’t wish to be locked in to a conventional vehicle purchase or lease have a number of innovative and economical options as well.

• Companies like Swapalease offer short-term leases for late-model and in-demand vehicles by matching people wanting out of their current car leases with others willing to assume those leases for the balance of the lease term. The new short-term lessees generally are subject to no down payment or dealer fees and a low monthly payment, and often lease sellers offer extra financial incentives.
• Car rental agencies often offer month-to-month rentals for consumers who are unsure how long they need their own vehicle.
• New and used car dealers are increasingly offering cancel-anytime leases for individuals unwilling to commit to a standard lease term. Lessees usually pay a smaller down payment but a higher monthly charge when compared to a standard lease.

Drive sales while meeting compliance requirements

Even as consumers’ needs and preferences change, we must find ways to drive auto loan sales while meeting industry regulations. Currently, some consumers are indicating that traditional purchases and leases are no longer practical or attractive. To continue to grow auto lending, we must answer the call to find additional opportunities to serve members with attractive auto loan options.

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