‘Usage-based’ Model on Horizon for Auto Finance

NEW YORK CITY – The car financing process will shift to a usage-based model, while credit scores will become obsolete. That’s the upshot from Guy Fraker, chief learning officer at AutonomousStuff, a supplier of products and services for the autonomous car space, on the future of auto finance in the world of connected mobility.

“There is a critical hurdle, when we talk about democratizing mobility, that we are going to have to overcome,” Fraker said during a discussion on the Future of Connected Mobility, organized by the trade fair company Messe Frankfurt this morning. “I don’t think there is anyone better positioned than the finance structure within the auto industry to break that hurdle.”

Currently, the industry is “overly reliant” on credit scores, Fraker said. “When we get passed debit cards, credit cards, and loans, we’ll get to a usage-based payment model,” he said. Regardless on how the ownership model changes – whether it’s the OEM that will own the cars, or a group of people – the financing process will transform into a shared, pay-as-you-go practice.

“I think the auto finance and insurance industries are the furthest behind on the connected mobility, but they have the opportunity now to propel to the next generation,” according to Fraker. That said, he added, some finance companies, such as Ford Motor Credit Co., have already began experimenting in the shared financing and payments space.