Necessity, as they say, is the mother of invention.
COVID-19 is spurring firms that rely on consumer spending, and on lending to finance big-ticket purchases, to invent new ways to keep business flowing – with a nod to the fact that the uncertain economic impact of the virus may hurt consumers’ near-term ability to pay for those items.
That’s especially true of automakers, who are cobbling together special deals to entice consumers – with new ways to get the vehicles to the new owners, and extended payment terms for people who may be facing a turbulent employment picture.
From a high-level view, creativity is sorely needed.
Reuters reported on Monday (March 30) that as consumer confidence declines and dealerships have been forced to close in an effort to help thwart the pandemic, new vehicle sales likely had a disastrous showing for the month of March, a trend that will continue into April.
The official data are not in yet (after all, today is the last day of the month), but forecasts are bleak, to say the least. In one example, TrueCar.com, an online auto marketplace, has forecast that March sales will be down by around 37 percent, and April sales might be down between 50 percent and 60 percent.
“When you look at March, we basically lost half the month,” Eric Lyman, chief industry analyst at TrueCar, told Reuters.
Separately, the newswire noted, Cox Automotive estimated that sales in states with strict travel or “stay at home” restrictions, such as California and New York, have seen sales decline by as much as 90 percent.
J.D. Power reported this week that carmakers including (but not limited to) General Motors, Nissan, Toyota and others have crafted coronavirus-specific car payment plans and programs.
“OEMs and their captive finance partners have a number of tools to support consumers during times of uncertainty, both those looking to purchase a new vehicle as well as those looking to continue maintaining their existing vehicle,” said James Houston, J.D. Power managing director, consumer lending and automotive finance.
In particular, the financial services arms of these manufacturers, such as Ford Credit, GM Financial and other lenders, are offering extended payment terms. In one example, Hyundai Motor Assurance Job Loss Protection will pay up to six months’ worth of payments for vehicle owners who lose their jobs and purchase cars between March 14 and April 30 through Hyundai Capital. Lincoln is allowing customers to defer their first payment up to 120 days when purchasing a new vehicle. That 120 days seems to be a bit on the cautious side – an implicit estimate of how long it may take to gain visibility into the job situation, to gain financial assistance (from the government, if needed) or reach at least some point of financial stability to make that first payment.
And as eCommerce increasingly gains traction – and as tens of millions of U.S. consumers shelter in place – auto firms are increasingly kicking the virtual tires. GM has had its “Shop. Click. Drive” program in place since 2013, allowing consumers to shop for cars and apply for financing online rather than on-site at the dealership. As reported in The Wall Street Journal, GM has said the number of customers shopping for vehicles through the online program was up 30 percent year over year, with 5,000 site visits since mid-March.
Bumpy roads ahead, it seems, but firing on at least some cylinders is better than stalling out.