5 Innovative Auto Trends for 2020 That May Combat Declining Auto Sales

As auto prices climb, they are outpricing many consumers’ budgets. New car sales in the U.S. fell in 2019, and most analyses predict a slight slip of sales in 2020, according to the New York Times. The average monthly payment for vehicles is also near an all-time high – $554 for new vehicles and $391 for used vehicles – according to Experian. Thanks to these higher prices, auto delinquency rates surged to record highs in 2019, according to data from the Federal Reserve Bank of New York.

These numbers are having a big impact on consumers. According to a recent PenFed survey, nearly half (46%) of respondents ranked the amount of the monthly payment as the most important factor in choosing an auto loan. Respondents also ranked price, along with reliability, as the top factors in choosing a vehicle, above performance, comfort, brand reputation and even safety.

With the average new vehicle now selling for over $37,000, according to Edmunds, many consumers are choosing to hold off on upgrading their vehicles, buying used instead of new, showing interest in ridesharing services like Uber and Lyft, and looking for more flexibility in their auto payment options.

This means the auto and financial industries are facing pressure to invent more innovative financial products and offer more appealing car buying options and experiences to attract consumers. Here are five new auto trends that consumers can expect to see in 2020:

1. Online Car Sales

We buy almost everything online today – except houses and cars. Now, in Europe, automakers are developing pilot programs to take vehicle buying digital. According to a study by Cox Automotive, 60% of dealers in the United Kingdom claim they will be able to provide digital transactions within two years. In 2020, Ford will launch its online ordering system alongside the rollout of its first standalone electric vehicle. Making vehicle purchasing easier and more transparent by bringing it online may help attract more buyers.

2. Artificial Intelligence

AI means more personalization and customization. AI will use advanced analytics to suggest tailored vehicle options for consumers. In early 2019, Driverbase Inc. launched its free service that uses driver data, driving routes and current vehicles to provide personalized vehicle recommendations. In the near future, buyers will be able to visit any dealer and be greeted with customized suggestions for automobiles, financing and customization options.

New technology will also make the car buying process easier and more enjoyable. In an Auto Success survey, 29% of respondents said the biggest hassles in car buying are research and negotiation. By helping streamline research and quickly calculate transparent pricing options, AI technology will eliminate common frustrations in the car buying process.

3. Car Subscription Services

For a monthly fee, a consumer receives access to a variety of vehicle models in a manufacturer’s lineup; insurance, maintenance and roadside assistance are also included. Cadillac, BMW and Volvo, among others, are already offering these services, but they don’t come cheap. BMW’s lowest-priced option, for example, is $1,099 per month, and Volvo’s starts at $600 per month. Still, if the trend catches on, we will likely see more affordable options in the coming years that may be an attractive alternative to the traditional purchase.

4. Complete Lease

Last year, Lexus launched its Complete Lease program in seven states. The program involves a two-year, 20,000-mile lease that includes insurance and maintenance for a single, non-negotiable price. It reflects a growing desire among consumers for simple, non-complicated payment options, and other manufacturers and dealers may soon follow suit.

5. Walkaway Balloon Loans

Most consumers still prefer owning to leasing. According to a recent PenFed survey, four out of five consumers would rather purchase than lease a new or used vehicle. In the past, consumers have been wary of balloon loans as a financing option, with good reason. While balloon loans usually mean lower monthly car payments, consumers risk a large balloon payment at the end of a term with open-ended balloon loans. But now, balloon loans are undergoing an innovative transformation. PenFed recently launched a Payment Saver Plus loan for both new and pre-owned vehicles up to five years old through an indirect channel. This innovative loan offers the benefits of ownership combined with the lower monthly payments of a lease. But the closed-end balloon product also gives consumers the option to walk away from the balloon payment at the end of the term, which provides peace of mind against the risk of vehicle depreciation and potential negative equity.

The future of car buying is one that combines ease and transparency with flexibility. To attract consumers, manufacturers and dealers, financial institutions will need to offer increasingly innovative and diverse options that transform the way we research, buy, lease and drive vehicles.

Ivan McBride is vice president of Automotive Lending Products and Sales at PenFed Credit Union in Tysons Corner, Va.