The future of vehicle financing: embracing technology and innovation
To keep up with the latest innovations driven by technology advancements, the automotive industry is expected to change dramatically over the coming years - with car financing operations being a huge part of those developments. Check out this blog to find out what First Response Finance anticipates will be the future of car finance.
It is estimated that, by the end of 2035, 40% of new UK car sales might have self-driving abilities, meaning that autonomous vehicles will soon be a frequent sight on roads across the country.
As technology continues to advance at a light-speed pace, the automotive world is bound to change significantly in the next few years.
With driverless cars on the go, we can expect a boom in carsharing and co-ownership, where people hop and change motors as they please. And as new petrol- and diesel-fuelled vehicles are banned from the UK market in 2030, there will be a substantial rise in fully electric and hydrogen-powered cars cruising around town.
So, with this in mind, will tech and innovation alter the landscape for auto financiers, too? Jonathan Such, Head of Sales at vehicle finance company First Response Finance, looks at how emerging technology is likely to transform car financing operations.
AI-driven credit assessment
In the near future, artificial intelligence will play a massive role in the automotive sphere both on and off the road.
On one side, AI in autonomous cars will take care of most of the driving, chauffeuring people from A to B in a calm and serene way. On the other, it will make sure that potential owners and passengers have the right creditworthiness to purchase or borrow a specific vehicle.
Through AI-driven credit assessment, clever algorithms are able to analyse vast amounts of data to create a comprehensive profile of the borrower. This might include anything from income levels, credit history, and employment stability.
In this respect, it can even offer real-time credit decisions. Rather than having to wait several days for a decision, applicants can receive a rapid response to their loan request, cutting down on time and effort.
What’s more, the beauty of AI-driven credit assessment is that it can also suggest and customise loan structures that best align with a borrower's financial situation and preferences. For instance, if you are looking for a deal that isn't too harsh on your finances, AI might recommend a longer loan term to spread out the costs and make payments more affordable.
Blockchain technology provides a shared and immutable database that helps with tracking assets and recording transactions.
It is generally used for cryptocurrency purposes, but it can be adopted in the car financing world to introduce security and transparency in the lending process. How?
Since records on a blockchain are immutable, they cannot be changed once they've been entered into the system. This way, you will always have a tamper-proof record of loan origination, ownership transfers, and payments, reducing the risk of potential disputes or fraud.
Blockchain can also be used to keep details of a vehicle's history, from ownership changes to maintenance and accident reports. This allows buyers and borrowers to get an accurate picture of a car's status before committing to it, limiting the chance of ending up with a stolen or damaged motor.
Usage-based and subscription-based models
As technology evolves and car options continue to expand, more and more drivers may wish to try a wide range of different vehicles rather than sticking to a single model for 10 years or so.
Currently, 58% of British motorists say they feel uncomfortable with the idea of being at the wheel of a self-driving car. But when driverless vehicles are finally introduced on our streets, how many will resist the temptation of taking a ride?
The constant release of innovations could lead to a departure from traditional ownership-based financing, favouring a usage- or subscription-based model instead.
For instance, a pay-as-you-drive (PAYD) type of financing would allow people to invest in a specific car depending on how many miles or hours they have used it for.
Likewise, a subscription-based alternative would give consumers the flexibility to choose a vehicle that best suits different scenarios. Perhaps you may like a small, driverless motor for those short city trips to the supermarket. And when it comes to cruising through country lanes, you may prefer an electric SUV.
Subscription-based financing could help you switch cars easily without the burden of long-term commitments.
The UK government has plans to drastically reduce traffic-induced pollution. In fact, by 2035, it intends for all new cars and vans to be fully zero emission at the tailpipe. And with the technology at our disposal, manufacturers are increasingly finding ways to build green, eco-conscious models.
To promote the rollout of electric vehicles and low-emission cars across the country, car financing options may soon come with incentives for all eco-friendly models.
This means that borrowers who are looking to buy an electric, hybrid, or fuel-efficient vehicle might be treated to better loan offers.
This can include anything from lower interest rates to extended loan terms, resulting in more favourable monthly payments and a healthier bank account.