Description

“Vehicle financing was already stressful prior to the pandemic; the added layers of high unemployment rates and increasing financial concerns have amplified consumers’ feelings of confusion and being overwhelmed by the process. However, through the advent of emerging technology and an industry-wide shift to offer more digital customer experiences, financial institutions have ample opportunities to transform vehicle financing into an easier and more convenient process in addition to helping all consumers have an easier time qualifying for a loan.”
– Hannah Keshishian, Automotive Analyst

This Report looks at the following areas:

  • The impact of COVID-19 on consumer behavior and the vehicle financing market
  • Understanding how the lending process evolved during the 2008 recession and what this means for during the pandemic
  • Ways for financial institutions to lift the burdens that come with financing a vehicle
  • Auto loan benefits most important to consumers

Table of Contents

  1. Overview

    • What you need to know
      • Key issues covered in this Report
        • Definition
          • COVID-19: US context
          • Executive Summary

              • Top takeaways
                • Market overview
                  • Impact of COVID-19 on vehicle financing
                    • Figure 1: Short-, medium- and long-term impact of COVID-19 on vehicle financing, February 2021
                  • Opportunities and challenges
                    • Digital loan advisors can reduce consumer pain points
                      • Low interest rates on EVs can provide a much needed boost to the segment
                        • COVID-19 financial assistance programs are still in high demand
                          • Auto loans offer financial flexibility and alternative spending
                          • The Market – Key Takeaways

                            • Vehicle financing during the 2008 Great Recession and COVID-19 recession parallel each other
                              • Low financing rates could give a jolt to the EV market
                                • Interest rates expected to drop further in 2021
                                • Impact of COVID-19 on Vehicle Financing

                                  • The state of vehicle financing during COVID-19 parallels the Great Recession
                                    • Figure 2: Short-, medium- and long-term impact of COVID-19 on vehicle financing, February 2021
                                  • Lockdown
                                    • Re-emergence
                                      • Recovery
                                        • COVID-19: US context
                                          • Learnings from the last recession
                                          • Market Factors

                                            • Auto loan interest rates expected to drop throughout 2021
                                              • Vehicle financing can alleviate stress caused by economic downturn
                                                • Figure 3: Consumer confidence and unemployment, 2000-December 2020
                                              • Potential COVID-19 stimulus checks could be a boon to cash down payments
                                                • Evolution of tech
                                                • Market Opportunities

                                                  • Educate consumers on co-branded card benefits to increase adoption
                                                    • Figure 4: Consumer attitudes toward credit cards, December 2020
                                                  • COVID-19 incentives generate interest in OEM auto loans
                                                    • Figure 5: Consumer attitudes toward COVID-19 vehicle financing incentives, December 2020
                                                  • Low financing rates on EVs can assist the growing segment
                                                  • Companies and Brands – Key Takeaways

                                                    • GM offers 0% financing to push new and used EV inventory
                                                      • Rivian and Chase soon to offer a fully digital vehicle financing experience
                                                        • Ally Financial revamps automated decision progress
                                                          • AutoFi lending-as-a-service to be a boon to online used car dealerships
                                                          • Competitive Strategies

                                                            • GM to offer 0% financing on used EVs
                                                              • Rivian and Chase partner to create all-digital financing experience
                                                                • Ally revitalizes and ramps up auto loan automation process
                                                                  • AutoFi offers “lending-as-a-service” to automakers, lenders and dealers
                                                                    • Figure 6: AutoFi lending-as-a-service campaign, December 2020
                                                                • Consumer Trend Drivers Impacting the Role of Transportation

                                                                    • Technology
                                                                      • Value
                                                                        • Wellbeing
                                                                        • The Consumer – Key Takeaways

                                                                          • Financing is the most popular way to pay for a vehicle
                                                                            • Establishing a relationship can lead to future business
                                                                              • Consumers gloss over most auto loan lender benefits
                                                                                • COVID-19 relief programs are a must for struggling consumers
                                                                                • Consumer Car Buying Behaviors

                                                                                  • Longer-term purchasing plans opens door for early communication
                                                                                    • Figure 7: Vehicle purchase timeline, December 2020
                                                                                  • Price tag of new vehicles opens door for financing offers on used options
                                                                                      • Figure 8: Vehicle type consideration, December 2020
                                                                                      • Figure 9: AAA Northeast, Vehicle Lending, February 2021
                                                                                  • Vehicle Financing Behaviors

                                                                                    • Financing is the most popular way to pay for a car
                                                                                      • Figure 10: Vehicle payment options, December 2020
                                                                                    • A small portion of car buyers are unsure how to pay for their next vehicle
                                                                                      • Figure 11: Vehicle payment options, December 2020
                                                                                    • The oldest and youngest car buyers are paying full in cash
                                                                                      • Figure 12: Vehicle payment options, by age, December 2020
                                                                                      • Figure 13: Credit Sesame email campaign, October 2020
                                                                                  • Auto Loan Lenders

                                                                                    • A prior financial relationship leads to future auto loans
                                                                                      • Figure 14: Auto loan lenders, December 2020
                                                                                      • Figure 15: Auto loan lenders, by age, December 2020
                                                                                    • OEM loans are popular among older consumers
                                                                                      • Figure 16: Auto loan lenders, by age, December 2020
                                                                                  • Auto Loan Benefits

                                                                                    • Consumers overwhelmingly focus on low- or no-interest; overlook other benefits
                                                                                      • Figure 17: Auto loan benefits, December 2020
                                                                                    • Early-career consumers seek COVID assistance as a lender benefit
                                                                                      • Figure 18: Auto loan benefits, by age, December 2020
                                                                                    • Source: Lightspeed/Mintel
                                                                                      • Offering no money down attracts consumers to OEM auto loans
                                                                                        • Figure 19: Auto loan benefits, by lender, December 2020
                                                                                    • Attitudes toward Vehicle Loans

                                                                                      • Pre-purchase financing education is needed to help car buyers avoid surprises
                                                                                        • Figure 20: Consumer attitudes toward auto loans, December 2020
                                                                                      • Consumers feel confused, overwhelmed by vehicle financing
                                                                                        • Figure 21: Perceptions of vehicle financing, December 2020
                                                                                      • COVID-19 loan qualification relief programs can aid concerned consumers
                                                                                        • Figure 22: Perceptions of vehicle financing, by household income, December 2020
                                                                                      • Securing the best auto loan is the most important part of car buying
                                                                                        • Figure 23: Perceptions of vehicle financing, December 2020
                                                                                    • Appendix – Data Sources and Abbreviations

                                                                                      • Forecast
                                                                                        • Consumer survey data
                                                                                          • Direct marketing creative
                                                                                            • Abbreviations and terms
                                                                                              • Abbreviations

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