Despite Pandemic, Federal Cash for Clunkers-Style Bailout Unlikely
One of the things that has helped the industry is that, in contrast to what occurred during the early days of the Great Recession, “credit has not dried up,” noted Jim Houston, Power’s managing director of auto financing.
That said, there have been major changes in the way buyers are shopping for, and then financing, their vehicles. A record number of U.S. car shoppers are doing their research digitally, then lining up financing online, as well. More and more have been completing the transaction virtually, as well. And Houston expects that to continue going forward.
In the new car market, meanwhile, captive finance subsidiaries run by the automakers have taken a much larger share of the lending business, largely due to the lucrative incentives they’ve introduced. While they may be paring back on the most extravagant of those givebacks, Houston sees the captives retaining more power. And that could lead to fewer banks and other lenders trying to compete going forward.
Even the insurance side of the business is expected to see significant changes going forward. As with financing, more and more of the process is going online, according to Robert Lajdziak, who oversees insurance research at J.D. Power.
There has been something of a consumer backlash springing out of the pandemic, he noted, driven by the fact that consumers feel they are due more money back since they have been driving substantially less. Insurers appear to be doing a poor job of handling refunds that are, in some cases, mandated by state regulators.
On the longer term, a Power study of U.S. motorists found “59% think they’re going to be driving fewer miles in the future,” and are expecting to pay less as a result. Many are now considering usage-based policies, such as Progressive’s Snapshot, which tracks both how you drive, as well as how much you drive to determine a customer’s rates.
Going forward, if Americans continue to drive fewer miles, said Lajdziak, there could be a “sharp increase” in the use of such policies.
Article by: Paul A. Eisenstein, The Detroit Bureau