This year, the auto finance market will see significant changes and need to prepare them for such changes. The primary reason to make such changes is that all of the four future states will coexist in the market. It is for this reason the auto lending companies will need to make changes in their lending policies so that they can serve to a diverse and wide range of customers.
There will also be a significant change in the customer behavior as well noticed due to such changes in the auto market, the lending policies and practices. As far as the customers are concerned the shift may be in consuming and purchasing transportation in the most dramatic ways.
To cope up with all these changes, the auto lending market will need to resize and specialize their business and redraft their lending policies in order to cater to a comparatively smaller market overall.
Change in consumer behavior
Experts and critics in auto finance industry point at the change in behavior of the consumer that has compelled the auto finance market to make the necessary amendments. They say that:
- People now are more conditioned to scale their affordability depending on different parameters such as the monthly payment and not only on the overall costs of the car.
- They also consider the overall financial consequences in the long term before taking out a car loan.
Based on these specific parameters, they determine whether or not they will be able to afford such huge monthly payments. They ask the right questions to themselves to find out whether they can truly afford a car that will cost them more than $30,000 which in reality will start the depreciate in value the moment it is pulled out from the lot.
The change in consumer behavior, as several experts point out, is also the result of the instant gratification. This is actually the consequence of the easy availability of car loans and the far liberal lending policies than before.
- Now you can avail such a loan from a traditional bank or a financial institution provided you meet with all their requirements.
- Even if they disqualify you for your low credit or for any other reason you will always find alternative sources to get a loan such as Liberty Lending and others.
- You may also get a loan at the point of sale that is especially arranged, if not provided by the car dealers in collusion with different lenders.
That means if you want to own the shiny new car model your neighbor has just bought, you cane easily and confidently walk through the door of your local car dealer and ride out in your own car a couple of hours later!
Long term and short term effects
However, easy as it may seem the auto lending market has made instant gratification, people are more conscious now with their borrowing approach. They consider the rewards in both the short term as well as in the long term and if they see they see that their retirement account is not growing as it should be, they may back out from such impulsive purchases.
- For most people, it comes to the mindset of the people as well as their ability to repay the loan when it comes to buying a new car on loan.
- They may even figure out the monthly payments most accurately and even stretch the number of such payments even up to 84 months upfront.
However, in a few cases it is seen that such an approach has dual effect on the auto lending market as well as the consumers, of course in a different way.
- When the consumers abstain from taking out a loan and buy a new car it hits the auto financing companies negatively with reduced business volume and
- When the consumers take out a loan without considering the long term consequences they end up damaging their financial health and as a result find them in a debt situation.
That means in the end of the day, the shift in the behavior of the consumers in new car purchases is killing both, irrespective of the reasons behind them.
Change in the new car mindset
With all those considerations mentioned above and judging the fact that most of the people are struggling to get moving ahead, there is an immediate and inevitable need to change their mindset regarding new car. This must be done once and for all. However, the question is how you can bring in such a change in your mindset.
As it is pointed out earlier, the primary issue that could be keeping you back from making such a change in your new car mindset is instant gratification that you are unable to delay, for some reasons.
- The most significant reason is that most of the people love to have a new car no matter whatever is the price that you have to pay for it
- For some people buying a new car is simply ‘fun’ as they enjoy the much coveted feeling and the ‘smell of the new car’ and
- Few others want to look fancy to their friends and colleagues or feel good when the passersby look at them when they cruise down the street.
These people are considered to take on a loan without considering the long term effects of it especially. It is this set of mind that they need to change so as to make the most of the auto lending market.
Looking at the future
The future of the auto lending market may apparently look bleak, considering the fact that the consumers are now more conscious about taking out a loan. These changes in consumer behavior will surely shrink the volume of loans made by these finance companies in a year significantly.
However, the rise in sales and demands of the autonomous car fleets may also force them to steer course of their lending to cope up with the deficit. It is for this reason they will need to prepare them well to survive in 2019 and beyond.