In the past months since the onset of COVID-19, you’ve likely been in a reactive mode, scrambling to cope with the many uncertainties—pandemic-, economic-, and staffing-related—that have impacted your lending practice. There have been improvements in job recovery, but for many consumers, financial incertitude remains. According to TransUnion’s Financial Hardship Survey, 51% of respondents indicated they remain financially impacted by coronavirus.
For most lenders, the immediate, short-term effects have tested their ability to adapt their processes and survive. However, despite this turbulence, there may be a long-term upside. Auto financing during coronavirus has forced changes that actually ended up benefiting consumers, dealers, and lenders. Let’s take a quick look at how auto financing during coronavirus is changing consumer expectations.
Auto Financing: Coronavirus Short-Term Effects
The short-term effects of coronavirus have made themselves known all too well. Financial caution prompted by layoffs, furloughs, and every indication of a pending recession has caused a rapid decline in vehicle sales, and dealer lockdowns prevented even those who remained financially capable from making purchases. The volume of lease and loan submissions also experienced a similar dropoff.
Stimulus checks, unemployment benefits, and government-mandated forbearance helped stave off delinquencies and defaults, but lenders still experienced a surge of loan and lease servicing requests from financially struggling consumers.
But there may be an upside to the dismal data regarding consumer confidence and vehicle sales; consumer hesitancy to travel by bus, train, or plane is forcing consumers to reevaluate vehicle ownership.
For the foreseeable future, the trend of shared or subscription ownership is on hold. For consumers who haven’t been economically impacted by coronavirus, the latest models—connected cars and electric vehicles—offer new dimensions of travel comfort, convenience, and luxury as they eschew mass transit for intercity or interstate travel.
Coronavirus has also changed consumer expectations of the car-buying process. When dealer showrooms and lots were closed, dealers placed more emphasis on a contactless, digital sales process to replace in-person sales.
This led to consumers becoming accustomed to a digital car-buying experience, from initial research online and auto financing, to vehicle home delivery. Lenders play a critical role in providing a completely digital car-buying process.
|Take a few minutes to learn how a modern, cloud-based loan and lease platform is helping lenders meet the need for digital auto financing now and incorporating innovative functionality to continually improve the lending experience.|
Auto Financing: Coronavirus Long-Term Effects
To deliver their portion of the digital car-buying experience, lenders will need to employ lending platforms designed to support digital auto financing and evolve as the market’s needs change. Key capabilities that will support auto financing during coronavirus and meet future needs include:
- Integration with dealer inventory systems to provide a seamless vehicle selection and financing process.
- A cloud-based lending platform that supports a remote, work-from-anywhere interface, and automatically updates the software with functionality to keep pace with evolving loan and lease market needs.
- Support for loan submissions via mobile devices and leading operating systems.
- Digital document capture, e-contract, and e-signature capabilities enabling a completely paperless loan or lease origination process.
- Integration with cloud-based lending services to accelerate lending decisioning, increase lending opportunities, and reduce risk.
- Extensive automation capabilities such as workflows, decision rules, auto-structuring, and machine learning that enable rapid review and response to loan and lease applications.
Today, more than 90% of consumers begin the car-buying journey with online vehicle research. According to the Cox Automotive COVID-19 impact study, 71% of respondents who intend to purchase a vehicle indicated they expect the process to be more digital. The optimal digital car-buying process will allow consumers to select a vehicle, estimate any trade-in value, select from a range of vehicle-specific loan or lease options, submit an application, and receive a risk-adjusted offer within seconds, complete with e-contract and e-signature for review and confirmation. Taking convenience a step further, same-day delivery can be offered as an option if the vehicle is available locally.
Does Your Lending Platform Support Digital Auto Financing?
The economic traffic jam caused by COVID-19 has unfortunately yet to clear. If we’ve learned anything from auto financing during coronavirus, it’s that consumers and dealers are more than willing to move to the digital model of vehicle selection, financing, and purchasing.
This change in the market is forcing lenders to reevaluate their lending platform, and when necessary, make modifications to support fast, automated decisioning and digital auto financing that are so important during coronavirus and are becoming the standard for the future.
defi SOLUTIONS’ online defi CONNECT product brings together consumers, dealers, and lenders. It integrates with defi’s flexible, scalable, end-to-end platform that includes loan and lease originations and servicing systems to provide a completely digital lending experience. If you’re struggling to meet auto financing demands imposed by coronavirus, take the first step in realizing the benefits of digital lending. Contact our team today or register for a demo.