The Auto Industry Might Not Need Much Political Intervention

It wasn’t long ago that we thought the auto industry might need political intervention to rebound from the COVID-19 pandemic.

With auto plants shut down and dealers scrambling to figure out how to sell vehicles in a contactless manner it seemed the entire industry was in trouble. Add to these things the recent semiconductor shortage and the low inventory numbers at dealers and the recipe for possible disaster was in place.

Consumers are Spending More than Ever

During the first quarter of 2021, more money was borrowed for longer periods of time to pay for more expensive vehicles than ever. The truck and SUV market is booming and much of this has to do with the higher vehicle prices that are being enjoyed by automotive shoppers right now. This increased financing helps add health to the bottom line of the automotive market as a whole.

Dealers Were Among the First to Rebound

While most automakers are still trying to build the inventory dealers need to be able to sell the vehicles that we drive every day, many dealers found a way to sell vehicles virtually and then deliver them to the homes of customers during the pandemic. This was one of the most creative automotive sales techniques offered last year and some dealerships still offer this process to customers.

Credit Scores Rose During the Pandemic

Whether it had to do with the stimulus payments that were sent out by the government or the fact that many consumers found ways to spend less money whether forced or otherwise, credit scores are on the rise. With higher payments, larger loans, and better credit scores, more shoppers are able to take advantage of low interest rates which bodes well for the auto industry which is looking for ways to avoid the need for political intervention.

Used Models Sales are Up

Not only are we seeing an increase in the number of loans for SUVs and trucks in the new vehicle market, but used models are on the rise as well. Lenders are reporting loans that last longer periods and of greater value. This means those large numbers of vehicles sold before 2019 are being bought as used vehicles today. Many used car dealerships are well-stocked with model options.

Delinquent Loans have Decreased as Well

Even with larger loans for longer periods, the number of loans that are delinquent has fallen in the last quarter. This means consumers are meeting their agreed-upon payments on time more often and paying the higher prices of the larger vehicles they love to drive. This is extremely good news for the auto industry as many people who bought a new or used vehicle in the first quarter of this year will be back for another one in three to four years.

Will the auto industry need political intervention to recover from the pandemic? If loan rates and prices continue to be much higher than before, it won’t be long before this industry is back on track. The average profit for larger, more expensive vehicles is much higher than for smaller and cheaper models, which gives the industry more money per vehicle and per loan.