With this year halfway behind us, we shift to provide insight on auto lending trends and projections for the next year and beyond. As the auto industry continues to put digital applications at the forefront of initiatives, always competing for consumer time in the sea of brick and mortar and growing digital providers, the industry sees a challenge in new vehicle production against used vehicle purchasing and sales. This creates space for opportunities such as digital storefronts and enhancing the borrower experience. Hop in as we cruise through some trends that will drive auto lending into the next year.
Market Overview: Where Are We?
The auto sales and auto lending industry has seen the need for rapid adoption of new technologies and new processes over the past few years. And the next few years will likely be no different. With the rising popularity of contactless auto purchasing and even car “vending machines,” dealers and lenders see the need to invest in digital experience. As we’ve seen production slow-downs due to supply chain issues, consumers holding on to their vehicle a bit longer look to products like refinancing to take advantage of interest rate fluctuations due to personal or market changes. A study from auto-focused digital lender, Upstart, finds the value in offering a refi product may be:
“…not having to target consumers who are in the market for an auto purchase, which can be difficult to detect, as well as the fact that there is less potential risk, as these applicants already have a track record of loan repayment…” [source]
These behavioral changes in the industry help us look toward what may be coming next, but keeping focused on the critical pillars of lending in areas such as security remains a high priority.
Never Forgetting About Security
When adopting new processes and platforms in lending, it is important to understand the risks associated. Whether you’re transforming your platform from paper or an already digital-focused system, making any alterations comes with an amount of risk, both in information security and consumer fraud.
While talking about security may feel as “trendy” as your flip-phone from 1998, lenders that continue to remain focused on shoring up systems maintain the benefit of their borrowers peace of mind, and a rigid platform, resistant to growing threats.
Moving Toward Digital as a Brick and Mortar Dealer or Lender
It likely feels like a major undertaking to pursue digital-first auto sales and lending when the market has been already growing rapidly for years, but that is where we’re headed (and it doesn’t have to be that difficult). Remaining competitive, beyond what some might call a “dealers market,” means continuing to adapt when the market is strong. Dealers from single-lot, to regional, to national are driving app-based purchases.
Our take:
Lot-based auto dealers and lending partners may feel like they have a disadvantage to sellers that are entirely digital-focused, but the relationship aspect of the auto purchasing process has not gone away (and may never). Dealers and lenders that invest in digital platforms may actually have an advantage over the rest, as they are able to utilize existing sales teams and processes to inject personality into a platform that may feel entirely robotic, otherwise.
While we keep an eye on what’s coming next to encourage forward movement in auto and auto lending, the loan origination software experts at FNI provide ongoing insights and, of course, high-level lending software and service to our loan origination platform partners. If you’re ready for direct access to decision strategy management and more, talk to a loan origination expert.
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