While for some consumers, a trip to the car showroom is a fun adventure and a chance to match wits with a salesman on the field of battering battle — for many people, the experience of buying a car leaves some things to be desires. Between the price haggling, the financing and all the high-pressure tactics, some consumers would rather sit the whole thing out entirely. Except that they can’t, because it’s not like they can buy a car online easily or reliably. Right?
Well, other than the fact that eBay Motors would likely disagree with the above — it also seems that the team at Ford has decided that they’d rather get consumers behind the wheels of their cars than into the showroom and has invested some money into making that an easier consumer journey.
Ford Motor Credit Co. — the lending arm of Ford Motors — announced yesterday (Jan 23) that going forward it will use AutoFi Inc. software to let car buyers shop for a Ford or Lincoln car and secure a loan online through its dealers’ websites. The deal will also see Ford making an equity investment in AutoFi — though as of yet, the amount has not been disclosed.
AutoFi doesn’t underwrite or decide loans on its own — as a marketplace for lending, it allows auto dealers to select banks, credit unions or alt lenders to pitch to prospective car buyers. Customers select the loan they like — and if the deal goes through, AutoFi gets paid by both the auto dealer and the lender.
“Our approach from the beginning was not to be, ‘We’re a Silicon Valley disrupter that’s come to take out the manufacturers and the dealers,’” said AutoFi Chief Executive Kevin Singerman in an interview.
This streamlines the process — though in many states, shoppers will still be going to the dealership because to purchase a new car, various laws require consumers actually be there in person to sign the paperwork.
The auto-loan market expanded rapidly since the financial crisis, surpassing $1 trillion in outstanding balances for the first time in 2015, according to the Federal Reserve Bank of New York. Q3 saw a record breaking $150 million in auto loans underwritten.
This has made automobile lending an increasingly sought-after space — car-buying firm TrueCar Inc. inked a deal with J.P. Morgan Chase & Co. in August to simplify the process of finding a vehicle and getting an auto loan online. LendingClub Corp has announced that it is entering the wild world of refinancing auto loans.
“There was a lot of innovation that was being brought for most other consumer finance products, but auto was really lacking,” noted Singerman, who co-founded AutoFi in 2015 after a stint as a corporate development executive at LendingClub.
Ford Motor Credit warned analysts that 2017 profit before taxes would be $300 million lower than forecast because the value of used cars is on the decline (one of the strager facets of an improving economy — people are more likely to buy new cars which depresses the value of the used ones.)