Vehicle Finance in 2023: Top Four Tips for Creditors
Shareholders Sara Costanzo and Milos Gvozdenovic recently attended the American Financial Services Association (AFSA) Vehicle Finance Conference & Expo in Dallas, TX. This event featured a robust lineup of education sessions focusing on hot-topic issues in the industry.
Now, Sara and Milos are sharing their top four takeaways from this educational conference:
1. The Importance of Diversity, Equity, and Inclusion
When it comes to Diversity, Equity, and Inclusion (DEI), there seems to be a new wave coming. From mentorship programs, internal training, and continued open discussion forums, the expansion of these ideas are turning into palpable actions. In the past, DEI was about adding women, LGBTQ+, and diverse races to the table. However, social justice is more than a workshop or staff change – it goes deeper to the culture and how to apply strategies that are outside the box and make them the norm.
2. Keep an Eye on the Electrical Vehicle Market
Due to the high cost to purchase an electrical vehicle (EV), along with the future high cost to replace a battery, three concepts have emerged:
- Financing the purchase of the EV without a battery (which brings the cost in line with the cost of a traditional vehicle)
- Separately financing the purchase of the battery
- Financing the purchase of the EV without a battery, and leasing the battery, to keep the cost low overall. In this case, short-term leases or purchases with a three-to-five-year term of a vehicle with a battery wouldn't make financial sense.
3. The Future of Supply Issues
It looks like supply issues are going to be continuing in the foreseeable future, which will be affecting the production of new cars. As a result, new car (and in turn, used car) inventory will continue to be relatively low and driving up prices, especially with used cars where prices are approaching those of new inventory.
In some cases, this can make new car financing better value. This also causes some ripples which bleed into our fourth takeaway: leasing. Some people are speculating used car leasing may be a solution, something which is already prevalent in Europe.
4. Changes in the Leasing Market
With a decline in the availability of new vehicles, many are choosing to hold on to leased cars, but not necessarily by way of purchasing it. The traditional 1-3 year lease may either extend to a 4-5 year lease; or with the supply chain still shrinking, the secondary lease market will grow, providing customers with a lower cost compared to buying.
Our team is constantly monitoring topics throughout this Weltman Insight and other topics within the industry. To learn more about Weltman’s bankruptcy and collateral recovery solutions, connect with Sara and Milos at any time.
This blog is not a solicitation for business and it is not intended to constitute legal advice on specific matters, create an attorney-client relationship or be legally binding in any way.
