If the past year has shown us anything, it's that the auto industry often turns expectations on its head. Take dealership sales – 2020 was a highly profitable year for many automakers and dealerships – despite early number drops due to physical closures from the pandemic.
Experian Presents Fourth Quarter Data
According to Experian's latest State of the Automotive Finance Market report, sales weren't spread evenly across the market, though, and subprime and deep subprime sales continued their downward trend throughout the fourth quarter of 2020. This is in part due to the soaring costs of financing a vehicle.
In 2020, the average price of a new vehicle topped $36,000 – and this year's prices are predicted to crush this with a whopping $40,000 average price tag. For many prospects, especially borrowers with bad credit, this cost prices them far outside of the realm of new-car possibilities.
And even used vehicles are hitting record averages. The Q4 2020 average price for a used car hit over $16,000 for deep subprime borrowers and over $23,000 for borrowers with good credit. The average cost of financing a used car was $22,000.
Some industry pundits are seeing this raising cost as something of a cautionary tale. In some cases, manufacturers are pricing themselves out of an entire market of prospects, and the trend only stands to worsen as today's high-priced new vehicles become even higher-priced used cars in a few years.
This inflating bubble of new vehicle prices leaves room at the bottom of the market for low-cost, compact, and often EVs to move into the gap. With many American automakers promising to step up production of electric and hybrid cars, the pool of ICE vehicles will shrink, driving up used car prices even more in the coming years.
Electric, Gasoline, Internet
Whether the future of cars is electric or continues to be driven by the fossil fuel industry remains to be seen, but the future of automotive sales is leaning toward the online space. Consumers have been demanding that more retailers meet their expectations for online sales, service, and touchless delivery options.
Though Americans have been after these convenience trends for some time, the auto industry hasn't always been quick to respond – until now. With the pandemic still dominating the global landscape, the online retail space has become a priority for many more dealerships and manufacturers in recent months. And the trend doesn't look to be slowing, even as the pandemic loosens its grip physically, and businesses begin to reopen at capacity.
Last year, U.S. consumer online spending rose 44%, which helped many automakers profit. This online space is a good opportunity for you to take control of your customer base and bring more prospects through your showroom doors, even if it's just virtually.
Our Services, Your Sales!
Subprime prospects have been some of the hardest hit over the past year, and while many of these consumers need an auto loan to get by, subprime lending is at levels as low as it was during the recession. In the fourth quarter, new car originations for subprime borrowers fell nearly 2 points to 7.34%, while deep subprime fell more than 50% to just 0.36%.
Used car financing for the same groups also dropped, making up 21.02% and 3.40% of the market respectively. Despite these record lows, we want to help you reach this loyal group of prospects that often just need to find the right dealership to shop their loan with.
Right now, we have even more ways to help you reach prospects than ever before. Let our services be the key to your success as we help you meet consumers on their level. How?
With our new branded social media marketing campaigns! This latest addition to our tried and true services which have been bringing prospects through showroom doors for over two decades can help you reach the consumers you're looking for!
If you're having trouble bringing in the subprime leads, then may it's time to get serious about social with our expert team. Plus, when you sign up for services you get the advantage of decades of experience in multiple online platforms – that's the CarsDirect + Auto Credit Express advantage!
To see how we can help you grab onto this loyal group of prospects, give us a call today at 888-535-2277 or fill out our contact form online and one of our expert associates can reach out to you.