Many consumers dread the car buying or leasing process—and with good reason. The process of finding a car, negotiating its price and then further negotiating the financing can be arduous. It's no more fun to begin making the monthly payments.
In recent years, however, a number of fintech players have started using digital channels to transform the auto buying, leasing and payment process. Some have platforms that allow users to purchase and finance new or used vehicles almost entirely online. Other fintechs are giving consumers a more efficient way to pay their auto bills and simultaneously helping to reduce default rates.
For example, Payix Inc. of Hurst, Texas, has an app that allows loan recipients to check account balances, make or schedule payments, chat with their lender and view their transaction history, among other things.
The app is tailored for “smartphone-dependent borrowers,” to help reduce the chance of the mobile-minded missing a payment or defaulting, explains Chris Chestnut, co-founder and president of Payix, which is also a registered ISO.
PaySwag in Reno, Nevada, takes a similar approach. Though its app targets underbanked consumers generally, Max Haynes, the company’s founder and chief executive, says it’s very applicable to the auto industry because so many consumers have car loans.
The PaySwag mobile app sends out payment reminders and even directs users to a local venue to pay their bill with cash, if they prefer that method over credit or debit. In a year-long pilot with a West Coast lender, PaySwag’s app had a 50 percent adoption rate—and it cut delinquencies by 50 percent, according to Haynes.
“A lot of people want to do everything from the mobile phone,” he says, noting that most lenders today are “mobile-also, not mobile-first.”
For many consumers, the entire process of buying a car can be handled on the small screen.
The high-profile IPO of Carvana—an online marketplace for buying, financing and trading in used cars—could raise further awareness of the industry’s digital shift, contends Jonathan Palan, co-founder and president of AutoFi, a San Francisco-based e-commerce software platform.
“It’s an education process. Once it starts to kick in I think you’ll see exponential-type growth,” he says.
Here’s how AutoFi works: Customers select a vehicle to purchase online from an AutoFi-enabled dealership. They apply online for financing, structure the deal that’s right for them and sign the forms electronically.The process can take just six minutes, compared to hours that can be spent at dealerships, Palan says.
New York-based Honcker is another digital auto lending platform; its mobile app allows customers to lease vehicles online, though it eventually expects to expand into car buying, says Nathan Hecht, the company’s chief executive.
Delivery or pickup usually occurs within 24 hours, at which point customers sign the required paperwork and pay the first month’s lease, bank fee and dealer and DMV charges.
Denver-based Blinker offers a mobile app that handles all aspects of the used car buying and selling and refinancing process. The app does everything from pricing and listing the car, to buyer financing and online paperwork. Sellers start by snapping a photo of their car; buyers take a picture of their driver’s license to begin.
“People are going mobile at ridiculous rates” says Danny Martinez, president of Blinker, which currently operates in Colorado and Texas, with plans to expand to California and Florida.