EP. 8 - Key Trends in Auto Financing for 2024 and 2025

Back to all episodes

Transcript

Speaker 1:
Hey there. Ever feel like the world of car buying changes every time you blink? It's true. We're about to go deep on auto financing trends for 2024 and 2025, so buckle up. By the end of this, you'll be navigating dealerships like a pro.

Speaker 2:
I have the intel straight from industry insiders. And let me tell you, knowledge is power when it comes to getting the best deal. Speaking of insider info, we're diving into a recent article from MeasureOne. Oh, I know them. They're an automation platform that's all about simplifying this process, and they're giving us the inside scoop on what's driving the future of how we finance our rides.

Speaker 1:
And this isn't just some abstract far-off future we're talking about. These trends are already shaping the market.

Speaker 2:
Yeah. Which is why it's so important to understand them now before you even think about stepping foot in a dealership.

Speaker 1:
Okay. So let's hit the gas and dive into the first big trend, the economy's impact on those all-important loan rates. It's been a bit of a roller coaster ride for borrowers lately, wouldn't you say?

Speaker 2:
Absolutely. This article doesn't sugarcoat it. It acknowledges that the current economic climate is shaky, which has been making those interest rates bounce around like a car on a bumpy road.

Speaker 1:
And I'm guessing inflation isn't helping either, especially when it comes to those sky-high new car prices.

Speaker 2:
Seriously, it's enough to make you wanna stick with your trusty old ride.

Speaker 1:
You're not wrong. The article points out that this perfect storm of economic factors is actually pushing more people towards used cars and, get this, longer loan terms.

Speaker 2:
Longer loan terms. On the surface, that sounds appealing—smaller monthly payments.

Speaker 1:
Right?

Speaker 2:
Mhmm. But I have a feeling there's a catch.

Speaker 1:
There is. While those lower monthly payments might sound tempting, stretching out the loan over a longer period could lead to something called negative equity. Imagine this: you could end up owing more on your car than it's actually worth, which is a situation you definitely want to avoid.

Speaker 2:
So with those economic factors in play, it's gotta be more important than ever to understand what we, as the car buyers, are actually looking for in this crazy market. And you know what's interesting? What's really fascinating is that the article highlights this desire, this real desire for flexibility, like above all else.

Speaker 1:
Flexibility. Wouldn't have guessed that right off the bat, but, yeah, tell me more. Tell me more about that.

Speaker 2:
Okay. So picture this. Gone are the days of that one-size-fits-all loan. You know?

Speaker 1:
Yeah.

Speaker 2:
Today's car buyers, they want options. Right?

Speaker 1:
They want options that fit their own individual lifestyles, their budgets. And so the article points to a bunch of examples like the rise of leasing, which we've seen, those balloon payments we kinda touched on earlier. And get this—even subscription models are popping up.

Speaker 2:
Hold on. Car subscriptions?

Speaker 1:
Wait. So I could, like, subscribe to a car the same way I subscribe to, like, you know, my streaming services. That's wild.

Speaker 2:
It is pretty futuristic. Right?

Speaker 1:
Yeah. But it kinda speaks to this larger point that the article makes, you know, about affordability.

Speaker 2:
Affordability being, like, a major concern for car buyers today. I mean, who isn't worried about that?

Speaker 1:
Yeah. Affordability is a big one, especially with the prices we're seeing these days. I mean, it feels like every time I look at new car stickers, they've, like, invented a new digit.

Speaker 2:
Right. And that's where those longer loan terms—remember we were talking about those?

Speaker 1:
Yeah.

Speaker 2:
Because it can seem like this quick fix. Right? Like, oh, I'll just make it work. But as we discussed, they can usually end up, you know, costing you more in the long run.

Speaker 1:
So it's like, are lenders stuck?

Speaker 2:
They're kind of in this balancing act. Right? Trying to make loans accessible and doable, but without, you know, trapping borrowers in this unmanageable debt. So how are they, like, managing to walk that tightrope? The article mentions something about AI, like, AI stepping in to personalize loans, which, to me, sounds both, like, crazy futuristic and, honestly, a little unnerving.

Speaker 1:
Oh, it's definitely cutting edge, for sure. But before you start picturing, you know, some robot dictating your entire financial future, like in a sci-fi movie, let’s unpack what this actually means, you know, what it really means. So lenders are using AI, but it’s more like they’re using it to analyze a much wider range of data, going way beyond just, like, your credit score.

Speaker 2:
Well, hold on. What kind of data are we talking about here?

Speaker 1:
Now I’m imagining, like, my Spotify wrapped playlist being used to determine, like, my loan eligibility. Please tell me it’s not that personal, is it?

Speaker 2:
Okay, okay. No. It’s not quite that invasive. The article talks about lenders using things like income verification, which is, like, especially crucial these days with the whole, you know, gig economy blowing up. Right? And even—get this—even education data to kinda paint a more, you know, well-rounded, holistic picture of your, like, financial stability.

Speaker 1:
Oh, okay. My English degree is feeling slightly less useless today. But seriously, how does, like, education even play into this whole thing?

Speaker 2:
Yeah, so it’s not about, like, you know, judging your specific degree or anything like that. It’s more about considering your potential. Right? Your earning potential, maybe your financial track record. And all this data basically helps lenders, you know, personalize loan terms, potentially get you a better rate, but it’s based on all these other factors that go way beyond just that, you know, credit score number. So it’s less about, like, a snapshot and more about getting, like, the full picture.

Speaker 1:
Right? Which, honestly, that makes me feel better. Like, I’m all about transparency and a more, you know, comprehensive approach. Those seem like positive steps.

Speaker 2:
Right. And this is actually a really important point because this is where the article emphasizes, like, all the ethical stuff. You know, all the ethical considerations, like, you know, data privacy, responsible use, all of that. It’s not like they’re just out there, you know, doing whatever. Lenders are definitely aware of these concerns, and they’re, like, actively working to make sure that this data is handled correctly, securely, ethically, all that good stuff.

Speaker 1:
Speaking of getting the full picture, we gotta talk about, alright, the elephant in the room, or, I guess, maybe the electric vehicle charging in the garage. The article made it clear that EVs are totally changing the game when it comes to financing, right?

Speaker 2:
Totally. Absolutely. And this is where things get really, really interesting, I think, for both borrowers and for lenders. Because, like we were talking about earlier, EVs, they just come with a much, like, heftier price tag up front. But it’s not just the price. It’s also that they come with this whole other set of considerations that those traditional loans just weren’t, like, designed to handle.

Speaker 1:
Yeah, it’s like a whole different ballgame. So, like, what comes to mind? Is it, like, the whole range anxiety thing? I’m not even sure my charging cable is long enough to reach from my apartment to my parking spot. But, seriously, what are, like, some of those unique challenges that EVs are throwing at the financing world?

Speaker 2:
You know, you hit on a big one right there. Like, that fear, that real fear of being, like, stranded somewhere with a dead battery—that’s, like, a real thing for a lot of people. And it kinda ties into—it speaks to this bigger point the article makes about battery life in general. Right?

Speaker 1: Because it’s not like a gas-powered car where it’s, like, fill it up and go. An EV battery has, like, a limited lifespan. Right?

Speaker 2:
Mhmm. Which can make it really tricky to, like, put a number on. Like, what’s its value gonna be down the line, you know?

Speaker 1:
Totally. So then how do lenders—like, how do they even begin to put a price tag on that kind of uncertainty? It feels like trying to, I don’t know, predict the weather 6 months out.

Speaker 2:
Yeah, yeah. No, it’s a huge challenge, for sure. But I think that’s where, you know, that flexibility we were talking about before comes back into play in a big way. And the article suggests, you know, we’re gonna see a lot more, like, loan products that are designed specifically with EVs in mind.

Speaker 1:
Yeah.

Speaker 2:
Like, think about things like balloon payments that are, like, specifically tied to that battery’s expected lifespan. You know what I mean?

Speaker 1: Y
ep. It’s kinda like having this built-in plan, you know, for when that battery eventually needs to be replaced.

Speaker 2:
Oh, interesting. So instead of, like, dreading the day your EV battery finally gives out, it’s like you’ve got this, like, financial safety net kind of built in.

Speaker 1:
That’s actually—that’s pretty smart. And I bet it gives lenders, like, some peace of mind too.

Speaker 2:
Right? Exactly. It’s all about, like, you know, finding those solutions that really do work for everybody. And here’s another, I think, really interesting thing the article brought up, which is, like, we might start to see more incentives, like, actual incentives from lenders for borrowers who choose, you know, more fuel-efficient vehicles like those EVs.

Speaker 1:
Oh, really? So are we talking, like, lower interest rates for being eco-conscious? Because, like, if saving the planet also means, like, saving me some cash—sign me up.

Speaker 2:
Yeah, it might not be, like, quite that simple, but, like, the general idea, right, is to make that green financing more attractive. Right? Incentivize borrowers to really, like—

Speaker 1:
Right.

Speaker 2:
—actually make those eco-conscious choices. So it really is, like, a win-win for everybody. It’s a win for the planet, a win for your wallet.

Speaker 1:
I like it. Yeah, count me in. Okay, so we’ve covered so much ground here today—from economic roller coasters to, like, the rise of the EVs. If you had to, like, sum it all up, what would you say is, like, the one key takeaway you really want our listeners to, like, remember as they’re navigating this crazy, ever-evolving world of auto financing?

Speaker 2:
You know, you’re right. The auto financing landscape is definitely changing, and it’s changing fast. But you know what? Those changes, they don’t have to be overwhelming. Right? Like, at the end of the day, by just, you know, staying in the loop—

Speaker 1:
Right?

Speaker 2:
—staying informed, asking the right questions when you’re out there, and, you know, just being open to the power of technology, honestly, you can navigate all these changes with, like, way more confidence and potentially, like you said, save yourself some time, definitely some money, and probably a lot of stress along the way. So it’s worth it.

Speaker 1:
Words to drive by. I love it. Well, hey, thanks for joining me on this deep dive. It’s been fun. Until next time, everyone—happy driving.