Our team recently joined the AFSA - Vehicle Conference and Expo in Dallas, Texas, where leaders in automotive lending came together to discuss the complex challenges and exciting opportunities the industry faces this year and beyond.
Between lasso tosses and llama sightings, the conversation was a mix of high-level global market discussions and struggles that micro dealerships face today. Below we'll dive into our top takeaways from the conference:
The global, national, and local impact on vehicles
At the international level, we're still seeing supply chain pressure, chip shortages, raw material extraction, global inflation, and fuel prices all impacting the global market. However, on the bright side, many are saying that we are starting to see improvements to supply and chip manufacturing, allowing more inventory to help stabilize prices.
At the domestic level, interest rate hikes, inflation, and layoffs dominate the headlines. Still, by and large, there is a sense of a more resilient economy and signs that the headlines may not be entirely in sync with the current economic situation. All that said, prices are still increasing at a record-high level with $718 as the average monthly cost of a new car and $536 for a used one.
At the local level, we're seeing Credit Unions engaged in a much higher-than-normal percentage of financing toward personal vehicles. Unfortunately, with the market complexities and challenges, we're seeing a record high level of late payments on both new and used vehicles with higher-than-average car repossessions. As a result, lenders must reevaluate their underwriting rules to help mitigate choppy waters.
Government push for electric vehicles
It's no surprise that the push toward electric vehicles (EV) has been gaining momentum in recent years. The government is pushing for EV vehicles with some aggressive targets, especially in states like California, which want to go from 5% EV to 100% by 2035. This push is ambitious, considering there are still many logistic issues to sort out, including harmonization on charging and reliability of working power stations.
How auto lenders are adapting to current economic events
Despite the negative picture the news paints, the industry has a far more positive outlook than negative. By acknowledging and addressing the challenges ahead, decision-makers can adjust their business practices to serve their customers better and create a more stable environment in 2023. We expect improvements in vehicle quality, access to advanced technology, and increased transparency for consumers to make informed purchasing decisions regarding functionality and cost.
Building customer loyalty with payment flexibility
Businesses currently use multiple communication channels to reach customers, from phone calls to emails, SMS, and even traditional mail. What resonated the most in our conversation with lenders was how Lexop's user-friendly debt collection software offers customers flexibility in payment source and method. When a customer can self-cure a late payment without agent intervention, this helps build loyalty and eliminates the risk of losing them to a negative past-due experience.
Optimism in the automotive industry
The AFSA conference provided valuable insight into the current state of the vehicle finance industry. The industry's challenges are significant, but there is a sense of optimism and a willingness to adapt to ensure a smoother ride in 2023.
We look forward to our continued conversations on how Lexop's debt collection software can help automotive businesses scale their collections efficiently while retaining customers in today's financial landscape.