One question LendIt attendees got answered for them this year is, “What is the future of financing and purchasing vehicles?” The auto lending industry is one that is in serious transition as we speak. A panelist of insiders discussed the question on the table and here are the highlights.
How Cars are Researched and Bought Today
Brad Rogers, chief operating officer of RouteOne, LLC made the observation that “the way cars are researched today is not the same as it was five years ago.” Anyone who has purchased a vehicle in the last couple of years can vouch for that. RouteOne provides online application and financing solutions for auto dealers. They process 50 million credit applications annually, which is why Rogers can say that customers want more information up front.
AutoFi President and Co-Founder Jonathan Palan said the innovation process for auto financing is driven by players outside of the industry.
He could mean technology companies like AutoGravity, a company that connects auto dealers and financing options with consumers ready to buy through a mobile app. Serge Vartanov is the company’s chief marketing officer and co-founder. Based on how users interact with AutoGravity’s mobile app, he’s narrowed car buyers into two segments.
“Some car buyers are less brand loyal and more emotional,” he said. “They like to compare vehicles and dealerships then get out of the transaction quickly. The other segment is more brand loyal.” The brand-loyal segment will move from one BMW, or their favorite vehicle brand, to the next while other buyers will purchase a car from the same dealer three or four years in a row. “They still want a fantastic digital customer experience.”
Sam Ellis, co-founder and CEO of DriveUp, said it’s very important to be transparent with consumers and, of course, not to violate consumer finance laws. DriverUp is a web portal that connects dealers and financiers with car buyers through a search feature online.
Blinker is another mobile app that allows consumers to buy and sell vehicles seamlessly. Rather than a focus on dealerships, Blinker connects individual sellers with individual buyers. Danny Martinez, the company’s president, said, “Used cars are sold primarily through dealerships, but a third are sold privately. With the advent of technology, consumers can sell cars without dealerships and buyers are able to transact digitally.”
Martinez sees Blinker as a “thinner” intermediary than an auto dealer. Sellers can get a better value by selling their car to an individual than they’ll ever get on a trade-in. Meanwhile, buyers can get a better car at a better price.
Palan said the average time car buyers spend in an auto dealer is 3.1 hours. “Anything you can do reduce that is good,” he said.
The customer wants to see what they want digitally, but they also want to hop offline and talk to somebody without having information repeated,” Martinez said.
Since titling is different from state to state, Martinez said handling that transaction digitally is a huge challenge for the industry to overcome.
Will Lenders Offer Separate Direct, Indirect Buying Channels?
Moderaor Craig Schleicher of PwC asked the panel if lenders will ever offer separate channels for direct and indirect buying processes.
Palan said the direct channel can be misleading. “The car buyer can go to a website and get ‘flipped’, so there needs to be a standard platform that allows each lender to offer a loan.”
“The average consumer doesn’t know the difference between direct and indirect auto financing,” Vartanov said, “but every lender cares.” He also said consumers want financing approved and the vehicle ready before they enter the dealership, which is a feature built into AutoGravity. He loves the idea of car buyers searching for the vehicle they want while lying in bed and getting approved for a loan at the same time.
It’s pretty clear from the current slate of auto buying and financing technologies that the future of car buying, selling, and financing is here, but I’m convinced it will only get better. It’s time to make the consumer aware.
Source: LendIt USA 2017