The Auto Finance Industry might be the Next Big Thing in Fintech

Fintech has a number of goals. Make things faster, cheaper and easier for customers and organizations. Fintech holds the promise of dramatically lowering operational costs and the barriers to entry for new players. Analysts have expected Fintech to revolutionize legacy-dominated financial services and open up new fields. And the auto finance industry is probably going to be the next big thing in Fintech for a number of reasons.

The Sheer Opportunity for New Services

The car market has two major pain points for customers and vendors alike, the length of the loan term and the cost. Customers may want that new or gently used cars, but they can’t afford the full car payment on a short loan term and they don’t want to be locked into a seven year loan. One major fintech firm has entered the market by offering competitive monthly rates to rent pre-owned vehicles. There is no predetermined term length, so customers get the flexibility they want. And because they aren’t paying down a full car loan, they pay less per month. They also don’t pay a penalty if they are continually turning in cars.

Car companies are also trying to find ways to monetize their growing inventory of used cars in the face of reduced demand thanks to car sharing services. Finding ways to rent out these vehicles will allow them to continue earning money.

The Growing Market

The domestic auto finance market is massive. In the United States, auto loans totalled 1.1 trillion dollars in the first quarter of 2018. More importantly, the market is growing. Americans are relying more and more on auto loans to buy cars. Furthermore, they’re remaining in debt longer. Americans are extending the average auto loan’s term to keep the monthly payments manageable. For fintech companies, that creates a high value market rich for disruption if you can provide greater efficiency to any degree.

Another area for growth is found in emerging markets. For example, the Chinese market has never had a history of auto financing. However, millions of Chinese want a car. Fintech lenders can enter this space and cater to a market that could dwarf the rest of the planet.

The Customer Demand for Change

The car buying process remains mired in traditional slow procedures in a world where customers demand on-demand and nearly instant service. For example, you can hear stories of people waiting hours in a dealership though they are cash buyers. Technology firms are now partnering with a number of auto industry players to lower costs and speed up transactions. For example, performing a  REVS check New South Wales is fast and easy when done with the right tools, while other software speeds up the process of checking inventories and calculating trade-in values. Customers themselves demand 24/7 information about their car and transactions that are as simple as buying something online while being utterly secure.

Auto companies are also under pressure to adopt technology to lower costs. One example is the way higher interest rates are causes Millennial to opt for car sharing instead of buying their own car. Companies have to find ways to offer more affordable car ownership to move vehicles off the lot.

The Benefits of the Cloud

Lenders are taking advantage of cloud computing in a number of ways. They can use cloud-based solutions for business software. This dramatically reduces their capital expenditures for information technology hardware and software. They get industry standard software at a lower cost, and the business software integrates with the systems of major lenders and third parties. Whether you’re pulling alternative credit data, determining compliance and risk or verifying the value of a car, your team can access all of these best in class tools 24x7x365. They’ll make better lending and purchasing decisions. And their agents are able to extend market reach because they can visit clients anywhere and seal the deal. All of this leads to greater sales at a lower cost to the organization.

Fintech firms are targeting the auto lending industry because it is massive, profitable and growing. They can’t afford to ignore this industry ripe for disruption, and their efforts will likely benefit consumers.