Mark Rappaport
President
Simplicity Division
EFG Companies
In 2017, we saw banks begin to pull back from auto financing, especially in the subprime markets. At the same time, captive lenders utilized manufacturer incentives to increase new vehicle loan volume, and credit unions increased their market share in both the new and used space by filling in the gaps that the banks left behind.
In 2018, we’re seeing a very similar pattern as banks continue to pull back and manufacturers continue to provide deep incentives to make new vehicles more affordable. The National Automobile Dealers Association predicts that 16.7 million new and 15.3 million used vehicles will be sold in 2018. While the new vehicle projection is slightly down from 2017, the used vehicle projection is actually higher than 2017 numbers.
In recent years consumers have been relying on leases and longer-term loans to afford vehicles with a price tag that keeps going up. This has resulted in large amounts of off-lease vehicles hitting markets in 2016, 2017, and in 2018. Meanwhile, the deep incentives provided by manufacturers are undermining vehicle values. The combination of the incentives and record off-lease vehicles hitting the market results in used vehicle values declining – hence the projected increase in used vehicle sales.
As more consumers look to purchase a potential surplus of pre-owned vehicles, auto lenders need to ask themselves how they can help dealers incentivize consumers to purchase with them. We all know dealers are more likely to send business your way if you act as a partner in accomplishing their goals.
