Investigating The Link Between The Evolving Transportation Ecosystem And Auto Finance

The future of auto industry and financing seems to be very bright, thanks to the even changing transportation ecosystem. Not only the car manufacturers but the auto finance companies now have to focus on making their services better.

  • The auto makers must focus on making customized autonomous vehicles and
  • The auto financers must focus on designing more customized loan products.

That means both the cars as well as the loan products must become more granular and modular.

On the horizon, the industry experts see the rise in demand of self-driven vehicles as well as car sharing. This they anticipate will:


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  • Alter the entire setting for the auto financiers
  • It can dramatically change both the number of loans as well as the size of it and
  • These loans will be much easily accessible to the borrowers who need them.

However, the rise in demand of such vehicles will make the customers increasingly a business rather than an individual car owner. That means, the overall loan volume is anticipated to decline.

The business figures

When you look at the business stats of the auto industry you will hardly find another consumer oriented business that is as dependent and well-functioning as it. It is for this reason that you find auto financing so widely available. According to a study report it is seen that:

  • Approximately the new loans and leases originated annually are valued at $500 billion and
  • Out of these 86% of the new car purchases and 55% of the used cars bank on borrowed money.

These finances are offered by banks, private sources, online sources like Liberty Lending, captives, as well as fleet financiers. All these arms of the finance machinery play an important role collectively.

When you consider the car loans offered by all these sources you will find that the US auto finance industry stands at $1 trillion roughly in outstanding loans and leases. This figure that translates into total revenue of roughly $111 billion is expected to rise, thanks to the evolving transportation biome.

The upcoming challenges

The role of auto finance may be well established as of now but looking at the current trends of evolution of the extended automotive industry on a global scale it is expected to face hard core challenges in the coming years. Why? The experts of the industry suggest a lot of possibilities and reasons for this such as:

  • The new mobility ecosystem
  • The series of congregating social and economic factors
  • The effect of the constantly changing technological forces
  • The advanced powertrains
  • The shifting consumer preferences and  
  • The emergence of autonomous vehicles.

All these factors will surely reshape in the coming years the way in which people and goods move about.

However, for auto financing there will be the most notable changes noticed. There will be the rise in shared access to vehicles along with a significant drop in the number of new car purchases by the consumers. This will in turn dramatically affect the number and size of the car loans as the consequence of the altered needs of the people.

Thriving in the changed ecosystem

The auto finance industry therefore needs to make immediate changes in their business model, policy as well as loan products to thrive in this emerging mobility ecosystem. They will need to rethink and reconsider several important aspects such as:

  • The traditional value chain that they currently and usually follow
  • The sales and loan origination methods
  • The servicing of customers and
  • Asset disposition.

They will need to base these on the scope of ecosystem provided to them and balance it with the transformation required to survive. This may vary from one type of lender to another. For example:

  • The large diversified and traditional banks that have most of the required capabilities already to make the change may face a challenge in communicating knowledge across different business divisions. They may also encounter some issues in rebalancing between and managing the volume of consumer and commercial auto lending.
  • On the other hand, the captives and other money lending institutions will be primarily focused on more dealer oriented loans than granting it to individuals. This is because they will need to discover different new business models and develop them so that it helps them to serve the greater pool of dealers and commercial borrowers of tomorrow.

However, both the traditional banks as well as the non-conventional money lending sources need to grapple with such changes, share insights, commence ongoing dialogue and know the implications to keep up with the evolution that is under way.

This will in turn help them to deal effectively with the disrupters and the incumbents as well as find and use the new sources of value creation.

In short, it will help the major stakeholders to explore all the different ways to play and win in this constantly changing mobility ecosystem. It is believed that businesses will come to know and follow the concrete steps that must be taken to day to prepare for a better future.

The core elements

In addition to that, all the core elements of shared mobility must be considered. This will help the auto finance industry to fund the shared as well as the driver driven vehicles that are considered to be the future state two. In comparison, the fleet finance companies on the other hand will be able to meet the needs of the rental car fleets that involve taxi, limousine, and other types of cars.

However, if you consider the future state four, you will notice that there is a sea change occurred in the auto finance sector. This is because the autonomous shared mobility has turned to be a reality now.

The finance model followed now will be more business oriented meaning the financers will be more focused on financing the fleet owners. Auto finance companies will also fund for other aspects such as maintenance and infrastructure of the shared vehicles such as insurance, fueling, recharging stations, and parking.

A few national dealers may become mobility management providers which will open up new frontiers for the auto finance companies.


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The views and opinions expressed in this article are those of the author and do not necessarily reflect the official policy or position of SpeedwayMedia.com.

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