Dec 12, 2018 Philip Burgess
Auto financing outlets have seen a spike in business in recent months. With consumer credit scores improving across the country, lending outlets have been able to extend more credit to car buyers, as the risk associated with loan activity has declined. American buyers are showing that they are once again on solid financial footing, which has even led to a surge in subprime auto lending, a sign that lenders have confidence in consumers' ability to stay on top of payments.
In fact, the overall auto loan balance in the United States saw a significant jump recently. According to The News-Press, data from Experian indicated that outstanding car loans during the third quarter were valued at $782.9 billion, nearly $103 billion more than the same period a year ago.
Uber strikes financing discount deal
These trends are positive ones for auto lenders, however, it shows that the competition for consumers is increasing. As a result, car financiers need to come up with innovative strategies and tools to attract more clients. Recent partnerships struck between car-booking firm Uber and automakers Toyota and General Motors provide a perfect example of how leveraging non-traditional policies can increase business.
According to Bloomberg, Uber drivers can now go to Toyota or GM dealerships to receive discounted financing rates for designated vehicles.
These lenders appear to have scaled back their rates in order to participate in a program that will likely see a high volume of business, as Uber's CEO Travis Kalanick asserted that his company is seeing increased demand among consumers. That means that the company will likely hire additional drivers who will be attracted to the Toyota and GM discounts.
"We need to make strategic moves so that we can supply those cars onto the system," Kalanick told the source. "The demand is there, but if we don't get the cars on the road - if we don't help our partners and drivers get cars on the road - then it just doesn't matter. We're just not going to be able to grow."
For car lenders and automakers, pursuing similar partnerships could be beneficial. Although the lowered rates for the Uber program may cut into the profit margin for some firms, the sheer volume of sales they will likely see makes the policy a worthwhile endeavor.