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(EMAILWIRE.COM, November 29, 2011 ) Asheville, NC - A few years ago many people were leery of online auto loans. It is the same in every ''new'' industry. As that mistrust has eroded, more people are applying for direct auto loans than ever before. This has been making some car dealers a little nervous about their profit margins, but, according to Power Information Network, there is still more than enough indirect lending going on to keep profits maximized.
The increase level of online auto lending is being spurred by several factors:
1. Shoppers are more accustomed to internet business.
2. Traditional direct lenders have launched smartphone apps...further driving internet auto loans.
3. Customers are using direct lending to compare deals against what a dealership is offering.
Those factors are causing ripples across the industry, but the vast majority of customers still use dealership financing for their new car, maintaining profit margins. ''Direct is not going to be your core business; itÂ’s going to be your side business,'' said Lana Johnson, vice president for Dallas-based Santander Consumer USA. Santander originates indirect auto loans via dealerships, but it also generates some direct loans. Direct loans account for less than 10 percent of the company's business.
The only business adversely affected by direct auto lending is the car dealership. Lenders will continue to make money on every loan, but the dealership will loos its financing reserve. The reserve is the profit made by arranging the financing for a car, usually at a higher rate than the lender requires, thus improving everyone's profit. At this time, direct lending poses little threat to dealerships, but it only makes sense that buyers will continue to arrange their own financing in larger numbers as the internet becomes a more pervasive part of everyday life.
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Source: EmailWire.com
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