The credit card industry might get a massive boost once autonomous vehicles come to market, and what’s more: Consumers will no longer need excellent credit when financing a car.
“Today, you can either buy, finance, or lease a car, and all three things require excellent credit; I believe in the future, that’s going to go away,” Grayson Brulte, president of Brulte & Co., told Auto Finance News yesterday.
Consumers can get a credit card with “OK” credit, he said, but to finance a car with a really good rate, consumers often need “stellar credit.” And a majority of the U.S. population do not have great credit, which is why the used-car market exists today, he added.
“In the future, autonomous cars will become subscriptions,” he said, like a “Netflix for cars.” The business model will operate more like Geico Insurance or a cell phone bill, for example, where a consumer puts a credit card on file and agrees to have that card charged X amount of dollars each month, he explained.
“It’s lowering the risk to the OEM, because [the consumers] are not going to own the vehicle,” he said. “You are going to subscribe to vehicle, and when you need it the vehicle will be summoned to you. So if the credit card is declined, or if you have insufficient funds, or whatever the scenario may be — and say you can’t pay the bill — there will be no risk to the OEM for the car coming to you because they just don’t send the car to you.”
The OEMs and captives will be able to put more individuals into the vehicles, all while lowering the risk, he said. “Today, when you buy, lease, or finance a car it’s going to one family or one individual. In the future, that same vehicle can go to four to 10 different families. The use rate will be higher.”
Consumers will be subscribing to a brand, whether it be an individual subscription or a family subscription. “For OEMs, that’s just going to increase their profit,” Brulte said. “It’s going to come down to a family for convenience to have three vehicles at a time, but they are typically not going to utilize three at a time.”
In short: The days of long-term loan contracts are over. “It’s the society we live in,” he said.
Those interested in learning more about the evolution of the transportation industry should join us at the second annual Auto Finance Innovation 2017 conference, May 17-18 at the Hilton Bayfront in San Diego.