Consumers struggle to pay for unexpected expenses, including car repair
How to make repair financing accessible
Access to capital for vehicle repairs is a struggle for many Americans. With the average car getting older, breakdowns and emergency repairs are likely causing more and more Americans to make painful choices. Timely repair financing can provide much needed support to customers in need of emergency repairs.
Consumers are a Breakdown Away from Financial Hardship
There are 69 million annual vehicle breakdown events in the US, 50% of which result in a tow (Agero). Ninety percent of vehicles towed result in a mechanical work order, averaging $400-700 dollars. However, according to a 2018 study by the Federal Reserve, 40% of Americans struggle to come up with $400 to pay for an unexpected bill. There are many underlying reasons for these financial hardships, but CNBC’s research suggests that high interest debt, such as credit card balances and high interest loans are one of the driving factors. With such a large percentage of the population impacted, there is plenty of opportunity to lend customers a hand by connecting them with much needed financial support.
Vehicles Are Getting Older
But how often does a given car really need repair? Increasingly, a lot. The average vehicle age in the US climbs every year and has now reached over 12 years old (caranddriver.com). With years of wear and tear, these older cars will naturally have a higher frequency of breakdowns and unplanned repairs. In fact, in 2019 Agero found that over 50% of cars greater than 8 years old have had a breakdown issue over the course of the year. And yet, the vast majority of older cars are not covered under extended service contracts (WardsAuto) that would cover necessary repairs.
The Solution: Repair Financing Options
What’s the best way to ensure the vehicle health of these older breakdown-prone vehicles? The straightforward answer is to provide accessible repair financing, but this isn’t always easy to come by. According to Fox Business, many financing options available to drivers come with high interest rates and closing costs, slow processing times, or even require collateral such as your car’s title or home equity to secure. The key is access to affordable solutions that would allow car owners to pay for the fully recommended repair at the time of service. With deeper pockets, customers can afford a comprehensive solution rather than opting for the bare essential fixes they can afford at the time. These short cuts can lead to future breakdowns, more extensive future repairs or even safety risks.
There are many ways to finance a repair, but intuitively, the easier and more affordable you make your process, the more likely your customer will be to take advantage of it and naturally increase brand affinity while they're at it. Here at Agero we’re always working to provide customers with best-in-class service. Stay tuned for more from us as we look to pilot a new financial solution for dealers and repair shops soon.
Frank Klemovitch is the Sr. Director of Product Management in the Dealer & Repair Line of Business at Agero. Frank has deep automotive industry experience and knowledge, with a tenure of over 21 years at Agero. He began his career as a software engineer before pursing an MBA at Boston College, after which he brought his technical and analytical skills to the operational side of the business. Today he is a passionate product management leader, focused on leveraging data and creative thinking to solve challenging business problems and deliver on superior customer service.