For some time, lenders, dealers, and industry experts have been pointing to a lack of consumer confidence as the main culprit for dragging sales. It seems like the way to shore up consumer confidence is to get to the heart of the matter: risk.
Essentially, consumers worry that they might lose their jobs or suffer some other similar financial setback. Who wants to plunk down $25,000 for a new vehicle if they’re concerned they might be unable to repay it? I know I wouldn’t.
In order to offset the risk, some automakers have offered financial guarantees. Here’s how the programs stack up, according to the latest data from Kelley Blue Book:
For new-car shoppers concerned about major financial distress, vehicle-guarantee programs are most effective. Among respondents, 76% would be inclined to buy a car if the automaker offered the option of returning it at no cost. Two other programs that would prompt new-car purchases involve manufacturers that offer payment assistance — either by making a certain number of payments for the consumer or by deferred payments for a fixed amount of time. Less popular options include a trade-down plan (the ability to lower payments by trading in for a cheaper or smaller vehicle) at 63%, and a gradual payment ladder (lowered payments for the first few months, working up to full payment amount over time) at 49%.
I’d be curious to know how often lenders have to pay on these offers. But I would guess the boost in vehicle sales volume would be well worth it.