This article was authored by CLA member company RNDPoint.
Total lockdowns caused by the pandemic led to tremendous development of digital technologies. Now, every industry has adopted digital solutions. Total digitization has become not only a modern trend but the inescapable, inevitable future.
In the article, we’ll try to reveal the current situation in the auto market. What trends are going to prevail? How can auto finance software providers ensure the industry’s further growth? And what benefits can auto retailers get from the digitization of sales? To learn more, read on!
The auto market in 2022. When there’s a fall, there’s always a rise
What the auto market is seeing at the moment is rather contradictory. According to the forecast made by research firms LMC Automotive and J.D. Power, the sales of new cars in the U.S. are going to drop 20.9% in May 2022. That is the result of supply chain disruption and consequently the shortage of cars for sale.
According to the same research, the U.S. Department of Commerce says that in April 2022, home sales fell 26.9% in comparison to the previous year.
The global sales show a similar curve. According to J.D. Power, the volume of new car sales in April 2022 had the steepest decline of 24% this year, which is majorly caused by supply constraints.
On the contrary, global electric car sales will continue to grow in 2022. According to the annual Global Electric Vehicle Outlook, the volume of electric car sales doubled by the end of 2021 and reached a new record of 6.6 million sold vehicles in comparison to 2020. Despite the global supply chain disruption, the sales volume is showing strong growth in 2022.
With all those cards in the deck, industry experts from Statistica are optimistic. They forecast auto industry growth by 38% in new car sales by the beginning of 2023.
Looking towards the future with optimism, auto financiers should act proactively. They need to bear in mind the future trends in the industry to stay competitive. In the next chapter, we are going to talk about the future trends for auto lending.
Current Trends in Auto Lending
The pandemic has greatly impacted the auto industry and made auto dealers adjust to the new reality of the post-pandemic world. The rapid development of digital technologies coupled with the fast evolution of their customers into tech-savvy consumers is pushing auto lending towards the digital transformation of business.
According to Wolters Kluwer, auto lending is going to face three main trends in 2022.
1. Total digitization of business
The pandemic has completely changed the way of doing business. The same has happened with customer behavior. Now, customers do not want to purchase a new car off the lot. New generations are essentially “born” with mobile devices in their hands. Younger people would prefer to research prices, brands, and lending terms online without visiting a dealership.
To keep up with the new generation of customers, auto lenders must put themselves in the shoes of their customers. Auto dealers should not just provide their services remotely. Digitization is much more than that. It embraces overall work enhancement, fast application and payment processing, convenient documentation handling, and more effective risk assessment and mitigation.
To thrive in this new reality, auto financiers need to establish long-term partnerships with technology providers to bring their customers the services they need and in the way they want. Implementation of top-notch auto finance software is becoming an unavoidable condition of auto lending sustainability.
2. Improvement of cyberattack protection
Like any other financial activity, auto lending should pay close attention to keeping customer financial and personal data, and loan documentation safe. With the rising number of cyberattacks and security breaches, legal security requirements are getting more and more stringent.
Auto finance providers need technologies to keep all the confidential and financial data securely locked and protected to avoid harm to customers and businesses while meeting all legal security requirements.
3. Digital assets securitization
Securitization of assets is yet another aspect of auto financing that can benefit from digital transformation. Electronic document workflow is the way to improve transparency, increase efficiency, and enhance risk mitigation around asset ownership.
The streamlined document turnaround and delivery, and fast documentation accessibility significantly shorten the time of loan dwell, thus increasing the efficiency of capital.
How can certain features of auto finance software help auto financiers stay abreast of future trends? Let’s take a look.
Auto finance software. The spear tip for breakthrough
For successful digital transformation, auto financiers should identify the challenges they face and understand how to solve them. It’s necessary to establish a partnership with a digital service provider for leveraging automated auto finance software with all features necessary for business needs and requirements.
With auto finance software on board, dealerships can ensure a 360° customer view. This allows flexibility in offering services, loans, and products needed by customers.
Digital auto finance tools effectively streamline and automate manual procedures and make them seamless, fast, and errorless.
Auto finance software is the perfect option for risk mitigation. AI and ML technologies eliminate errors in creditworthiness assessment and reduce loan default probability.
Cryptography, electronic signatures, facial recognition, and multifactor authentication are only a few new technologies applied to ensure the security of financial, business, and customer data.
Auto finance tools. What benefits are beyond the horizon?
The digital transformation of auto finance is not only about selling online. It’s about establishing a digital ecosystem that embraces customers, businesses, lenders, and third-party service providers. Here are some tricks that can enable dealerships to acquire a competitive edge:
It’s vital to shift the priorities towards what customers need instead of offering them what is in stock. Knowing and providing services required by customers at the appropriate moment via any communication channel is a win-win situation both for consumers and businesses.
Be cost and time-efficient
Automation of business processes, document management, and customer application processing are crucial conditions of digital transformation. That significantly reduces operational costs and saves time, while allowing employees to generate new revenue streams by lifting the burden of routine work off their shoulders.
Mitigate risks and collect effectively
To ensure sustainability, it’s important to manage any risks effectively. Auto financiers should minimize the risks of delinquent debts by in-depth potential borrowers’ financial health analysis and flexible collection strategies to avoid customer default.
Ensure high-security standards
The increasing number of cybercrime and confidential data leaks makes auto dealerships closely consider the problem of ensuring high-security standards. The lack of security measures may cause both financial and reputational losses and significantly harm businesses and customers.
Auto lending. Time for the digital shift
Regardless of whether there is a rise or fall in the auto lending market, auto dealers must follow global trends. The digital landscape already exists for automotive lenders, and all players must begin to embrace this new reality.