How Car Loans Will Evolve In the Days Ahead
The auto financing industry is continuously evolving just like other sectors of the economy. Add the coronavirus pandemic that is still wreaking havoc globally to the equation and you get an industry that needs to adapt with innovations and new technology to continue making sales and obtain new customers despite the challenges.
Here are some of the car loan trends and perceived changes in the auto loan market in the days ahead:
More Attractive Car Financing Schemes
Cars sales in Australia have been low since 2017. The new car market was growing steadily from 2011 onwards, but a decline in sales numbers was observed for the first time since 2014 from 2017 to 2019 because of a tougher economy, slowing house market, and the drought and a tightening of money lending. This decline continued in 2020 with the coronavirus outbreak.
To attract customers, various car financing companies have introduced attractive schemes, mainly in the form of low interest rates, 0% interest promotions, deferred payments, and repayment holidays.
The demand for car finance is also increasing, as different banks/OEMs and credit unions provide customers with numerous financing options at attractive interest rates.
Discounted car loans are also available at various dealerships. These include:
BMW Financial Services
- 0.9% APR financing for up to 60 months
- no down payment on 2019 and 2020 models
- discounts of up to $2,500 in credit toward the vehicle price
- 90-day deferments on certain loans
- 0% APR and low-interest loans
- Repayment holidays of up to 90 days for new customers
- Up to 120 days of deferred payments or 84 months of 0% APR financing on select 2019 and 2020 models
- First Responder Discount Program for doctors, nurses and other healthcare professionals
- Repayment holidays for up to six months if you lost your job due to COVID-19
- 0% APR financing and 90-day deferments on select 2019 models
- 90-day deferments
- Up to $1,000 credit toward select new vehicle purchases for current customers
- Discounts for first responders and healthcare professionals
Hyundai Financial Services
- Repayment holidays for up to six months to new borrowers who lost their job during the outbreak
- 0% financing with 90 days of deferred payments
Jaguar Financial Group
- Repayment holiday for to 90 days on select vehicles
Lexus Financial Services
- Up to 90 days of deferred payments to new customers
- Up to 90 days of deferred payments to new customers
Mini Financial Services
- 1.9% APRs for 60 months on select models
- Up to three months of waived payments
- Up to $1,500 off of select 2020 models
Nissan Motor Acceptance Corporation (NMAC) Finance
- Two months of payments in addition to up to 90 days of deferred payments
- Reduced rates to qualified customers on select vehicles
Toyota Financial Services
- Deferred payments for up to 90 days for new customers
- Up to 120 days of deferred payments for new customers
- 0% APR for up to 72 months on select new vehicles
Online Car Shopping
Even before the COVID-19 pandemic, there have been increasing capabilities to do digital online car purchasing for years, but like so many crises, this is accelerating a trend that was already in motion.
From a small number of dealers that were adapting and embracing online car selling, we can expect a much wider range of dealers who know it’s their best option right now, given that more and more people are buying products from home.
Virtual Car Showrooms
Consumers love to check their preferred vehicles up-close, something that is impossible during lockdowns. This challenge has motivated several car manufacturers and dealers to design virtual car showrooms.
VR technology will allow buyers to tour their favourite showroom in a game-like 3-D environment, while Skype or Zoom conferences with their sales agent will negate the need for physical meetings.
Online and App-based Ticketing and Scheduling
While people are still observing social distancing and limiting their face-to-face interactions with other people, many dealerships are now introducing app-based ticketing and scheduling for test drives to limit the number of customers who come in, as well as the visiting time of each customer.
Online Car Marketplaces Double as Lenders
Internet-based car sales platforms are expanding into online lending. Younger generations, in particular, patronise these companies to do more than car shopping.
They can view thousands of cars at any one time, order what they like online and even have it delivered to their front door, ready to drive. Some of these companies also allow cars to be tested for a week and have it returned if they’re not completely satisfied after the test-drive period.
If eager car shoppers do not have enough money on hand for the purchase of the vehicle, they can instantly arrange financing for their vehicle during the online shopping session by simply answering a few questions. A company representative usually gets back to them over the phone or email to verify the information and discuss the lending process and terms.
Pretty sneaky, right?
Traditional Institutions “Level Up” With Digital Innovation
Seeing the rising popularity of fintechs, online car lenders, and online car marketplaces that also make their own loans, banks and credit unions embrace digital innovation to stay relevant and competitive.
Almost all banks and credit unions now have online car loan applications and processing systems. Combined with online banking that makes it possible to pay bills and loan repayments without going to the bank, it is definitely fast and easy to apply for a car loan and manage repayments now and in the coming days.
But while the application process can speed up, the waiting time for approval may remain the same. Approval decisions from the big four banks usually take between one and three business days.
Getting a new car isn’t right for everyone. With an uncertain job market, even with months of deferred payments and 0% APRs might not help if you’ve lost your main source of income. However, if you can afford it, now is a great time to buy a new car because of various financing discounts and car prices that are relatively lower than normal. Understand and learn the new car loan trends and work it to your advantage.