The auto finance business provides a necessary service – transportation. According to CNBC, the emergence of COVID-19 has increased demands for personal transportation. The purchase of used cars compared to before the pandemic has skyrocketed.
According to WardsAuto, stimulus checks and unemployment benefits are commonly used to purchase a used car. This has positively affected students and auto finance companies.
In an email to The Courier, Inske Zandvliet, professor of economics at Dallas College Brookhaven Campus, said the demand for used cars is higher due to COVID-19. “People want to avoid traveling on public transport, so they buy cars,” she said. “This leads to the second reason – a new car is a bigger purchase. As the economy is now uncertain, in terms of employment, many people choose to buy a used car because it is not so bad. Dear.
Stimulus checks and unemployment benefits have helped not only essential workers, but students as well. Alora White, a student at Dallas College, has been fired from her job due to the pandemic. “I had to apply for unemployment and in doing so I bought a used car,” she said.
White said before the pandemic she had to rely on public transportation. “I’m much happier to have a car,” White said. “I don’t have to worry about the possibility of getting infected and I can get to where I need it without worry.”
Due to the sudden demand for used cars, auto finance companies such as Vehicle Solutions Corp have profited, according to CNBC Evolve.
VSC is a Miami-based indirect auto finance company with a satellite site in Arlington. Jorge Hernandez, risk analyst for VSC, said dealers submit contracts and VSC reviews them when deciding whether to fund and manage a loan.
When the pandemic began to hit the United States in March 2020, VSC tightened its underwriting guidelines, meaning it funded fewer, but better, loans than before. This change resulted in a decrease in the number of loans recorded.
“Initially, when we cut funding, our projections showed an equal decline in company revenue,” Hernandez said. “However, what we initially thought could be catastrophic for a company of our size has actually been a stabilizing force.”
The company has remained stable and has exceeded expectations in terms of performance based on projections made by Hernandez.
David Ricci, the company’s repossession manager, said his workload remained stable. “I expected to have to repo a lot more cars at the start,” said Ricci. “But over time, collections teams ended up keeping clients up to date or making payment arrangements so they weren’t picked up.” This meant that payments for used cars were paid in full and on time.
Because used cars sold better, there was a demand for them. “The subprime market was pretty strong, so the cars that we repo sold for a good amount,” Ricci said. The proceeds from sales made it possible to offset losses linked to the reduction in financing. Customers were able to successfully pay and buy their vehicles, especially used cars, thanks to stimulus checks and unemployment benefits.