Growing EV market is changing auto lending
‘We need to hunt as a pack,’ says Origence Chief Operating Officer Bob Child.
The pandemic, supply chain issues, inflation, and rising interest rates have put a hitch in auto lending’s giddy up in recent years.
“It’s been one thing after another,” says Bob Child, chief operating officer at Origence, a CUNA associate business member at the premier level. “It has been quite the roller coaster.”
Child expects the rollercoaster to continue as electric vehicles (EV) keep gaining popularity. In 2022, 6.7% of all new cars sold were EV.
“Some people are saying that's the tipping point because there were 38 new EV models that came out last year,” Child says. “We anticipate that the EV changeover is now catching momentum.”
Origence believes credit unions should plan for EV revolution to ensure they’re relevant to future auto lending needs.
“Credit unions need to hunt as a pack to give EV players and auto manufacturers the message that credit unions are relevant and want to be at the top of the funnel,” Child says.
To remain relevant, credit unions need to change their approach to auto lending, Child says. EV cars last up to 500,000 miles and typically don’t need extended warranties. This will require credit unions to be comfortable with longer-term loans because people are holding onto their cars longer.
Child expects the auto industry to implement more subscription services or software upgrades that keep vehicles up to date. That may mean financing subscription services, as well as home charging stations.
Another change is that many people buy EVs online instead of going to a dealer. Even on the used car side, people can order a car online and have it delivered.
That may affect auto sales in the long term, Child says, adding that before the pandemic nearly all vehicle sales took place at a dealership.
“We want to work with auto manufacturers so credit unions have a place within these purchasing channels,” he says. “So if members want to buy an EV online, credit union financing is available there, just like it’s available at a car dealership.”
This will require credit unions to develop a seamless platform that supports online financing. Child says the EV market is looking for 70% of lending decisions to be made instantly.
Speed is key in the online experience, he says. “You can’t be slow with a rate or a decision.”