Automotive News reported yesterday that American car dealers are seeing a soaring rise in auto loan originations.
Due in a large part to what the group calls “a general rise in household debt,” auto loan originations are “back to prerecession levels and the highest for any quarter since the third quarter of 2006.” Don’t worry, you didn’t miss a bull market or a soaring economy spike. Auto buyers are simply taking on more debt, including what they need to purchase new and used vehicles.
Auto loan originations were at approximately $97.4 billion at yesterday’s opening bell, 14 percent higher than this time last year. The New York Federal Reserve, in a November 14, 2013 report, noted a 10 percent spike in total outstanding auto loans, at approximately $845 billion.
Debt is Growing Again
Why is this happening? You may not even have time to ask yourself this, as you attend to the new customers flocking to your lot, but you should take the time to seek out the answers. Automotive News concludes that auto loan origination’s upswing is a direct result of Americans taking on more debt in general. If you can, try to picture what one-tenth of a trillion dollars might look like. That’s how much Americans increased their household debt from the second quarter of 2013 to the third quarter, up from $11.2 trillion to about $11.3 trillion. That one-tenth of a trillion wasn’t entirely spent in the auto loan industry, but spread over credit cards, mortgages, educational loans, and more.
How to Prepare for the Loan Onslaught
Some things are pretty obvious. Hit the auctions, make trades, and stock your lot with as much inventory as you can. You don’t want to turn away a customer who’s qualified and ready to put down that payment. Staff up, train your F&I people, and consider opening those doors earlier, later, longer. Stay abreast of auto industry financing news so you can monitor the situation for yourself.
Make Payment Painless
There’s no single “sign on the dotted line and drive away” in the auto loan industry. There may be many signings on the dotted lines, in triplicate, waiting on faxes, waiting on verification. One of the best ways to be ready for the auto loan origination onslaught is to have as many payment options available as possible, including the ability to facilitate those customers who wish to pay by checks, and with multiple checks. You may know it as future deposit or hold checks, the idea of a customer using 2-4 checks as down payment on a vehicle. The full payment is guaranteed to you, and you’re able to let the customer shuffle his finances to be able to afford that car of his dreams. Payments are authorized, automatically processed, and deposited into your dealership’s bank account.
Why Try It?
Spending is up – way up. That’s great news for the auto industry and the economy in general. Unfortunately, there’s the other side of this bell curve. Consumers who boost the economy will eventually have to pay their bills, and sometimes, some slip. They may decide to pay the month's mortgage, because they've got to live somewhere, rather than their auto bill.
Don’t let yours be the payment that bounces. You’ll spend more trying to recoup the money and repossess your vehicle, which may come back to you (if it does at all) damaged beyond saleability. Stay as positive as the market appears right now, and guarantee your dealership takes as much advantage of the auto loan origination spike as it can. Download this free guide to learn about how a multiple check program can help you - and your customers - ride off into the sunset.