LAS VEGAS — Auto lenders and retailers should be prepared for a shift from car ownership to usership within the next decade as new vehicle types and transportation options come online.
“Right now, we’re sitting at an ownership experience; everybody’s thinking ‘how I am I going to buy that car — is it a loan, is it a lease?’” Amira Aly, director of financial services at electric vehicle manufacturer Lucid Motors, said today during the Auto Finance Summit. “There is a shift in where buying power is going to be in the next ten years or five years. There is a shift from ownership to usership.”
Short-term usership models, such as vehicle subscriptions, have already gained steam in the auto finance industry with programs like those offered through NextCar. An influx of electric vehicles (EV) could bring more short-term user options, such as subscriptions. Hyundai Motor America, for one, announced earlier this month a pilot subscription service for its Kona EV in New Jersey.
“We can sit here and say ‘it’s not going to work for us, there’s not going to be subscription, there’s not going to be car sharing, there’s not going to be any of that,’ [but] it’s coming,” Aly said. “We have to be proactive about it; we have to find that optimum [usership] model [for the automotive industry].”
Lucid’s approach hinges on thinking about cars in a different way, added Robert McDonald, managing director and head of credit solutions for fintech Pagaya. “[It’s] thinking about access to transportation — how to get from point A to point B. That’s a very different thought process than owning a car,” he said.
Still, even with a potential shift away from car ownership, vehicle financing will play a large role in the market, McDonald noted. “Vehicles have to be financed in some shape or form, whether those vehicles are financed by consumer bank loans or commercial fleet loans,” he said.
Under usership models, lenders may underwrite the customer rather than the asset, Aly added.
At the end of the day, consumer preferences are going to drive changes in how cars are sold and financed, said Matt Traylen, head of RV and trade cycle management at Mazda North American Operations. “I see a whole range of options and possibilities opening up with usership,” Traylen said. “How are we going to adopt that? We’re going through the throes of that right now and in the next several years, especially with EVs.”