With new cars still in short supply, primarily due to the global microchip shortage, prices and demand for used cars continue skyrocket. New cars have over 200 computers on board. They are far more electronic than mechanical, so, a shortage in microchips means new cars don’t get made without them.
According to a 2021 year-end report from the analytics firm IHS Markit, U.S. inventory levels are at their lowest since the late 2000s financial crisis. A breakdown of new car inventory by manufacturer from Automotive Newscomparing pre-pandemic 2019 to year-end 2021 shows Honda inventory down 83%, Toyota inventory down 75%, and Ford inventory down 66%. That forces typical new car buyers to turn to two- and three-year-old vehicles, which is the major force driving up prices.
If you look at the Mannheim Used Vehicle Value Index, recognized by both financial and economic analysts as the premier indicator of pricing trends in the used vehicle market, the trip from January 2021 to January 2022 looks like a scale up Mount Everest.
Similarly, our average loan size at On the Road Lending has grown from less than $15,000 in 2014 to more than $20,000 in 2022—a 57% increase in eight years!
What this hot market means for On the Road Lending clients, is they must move fast to make decisions on a car. Cars are getting sold quickly, and dealers will not hold them. That makes our vehicle selection services more valuable than ever, since our experts are sourcing reliable vehicles that they know our clients can afford.
Also, it’s not just used car prices that are going up—inflation is impacting our clients everywhere. Since most of our clients are already suffering from credit challenges, it’s even more important for us to help them make decisions on purchasing reliable cars that will enable them to live their lives successfully. Our financial mentoring throughout the life of their loans helps them stay current on their payments and eventually improve their credit scores so they can qualify for loans from conventional lenders—not only for vehicles but for home mortgages, which is typically their end goal.
For our clients, a reliable car means transportation to work, medical appointments, shopping for food, and a host of other life-shaping activities. Every loan is a relationship that On the Road Lending invests in, providing financial education and hands–on coaching along the way. Not surprisingly, 97% of On the Road Lending loans are repaid. We know from our almost 10 years of experience that better cars lead to better jobs and better lives.
Our life-changing auto lending process is creating prosperity one car loan at a time by focusing on the character of our clients rather than their credit scores.