Here’s a great video from the CarDealershipGuy YouTube channel showing how dealers can help car buyers get positioned to handle car payments while lessening the long term payoff burden. See some highlights worth mentioning below.
Key strategies for rethinking payments
Bi-Weekly Payment Programs: Instead of a single monthly payment, dealers are offering bi-weekly debits every 14 days. This helps customers who live paycheck-to-paycheck budget more effectively, as they can manage smaller amounts (e.g., $500 every two weeks) rather than a daunting $1,000 monthly bill.
Accelerating Equity: By making bi-weekly payments, customers effectively make 13 monthly payments a year. This extra payment is applied directly to the loan principal, shortening the term and putting the buyer in a better equity position when they are ready to trade in.
New Retention Incentives: Dealers are introducing products like a $499 retention credit. Customers pay this small fee during the first year of their loan, and if they stick with the payment program for at least two-thirds of the term without missing a debit, the dealer credits that $499 back toward their next vehicle purchase.
Transitioning to Used Cars and Leases: With 20% of new car payments exceeding $1,000, used car leasing is set to surge, as buyers seek ways to lower their monthly financial burden.
Why These Changes are Necessary
Affordability Signals: 84- and 96-month loan terms have become a significant problem, and half of all current car loans are now at 72 months.
Budgeting Support: Bi-weekly payments align better with standard payroll cycles, reducing the likelihood of defaults and the cancellation of F&I (Finance and Insurance) products.
Shortening the Trade Cycle: These programs aim to reduce the time it takes for a customer to return to the dealership - typically aiming for a trade-in around 37 months - by ensuring the buyer isn't "upside down" on their loan.
If you don’t think monthly car payments are an issue, check out this eye-opening video where car consumers reveal how much their ride is costing them each month!
Thanks for reading everybody!
-Paul