From making ends meet to paying off debt, many consumers are overwhelmed by financial obstacles. A 2022 study found that 65% of Americans said money is a significant source of stress – the highest percentage since 2015.Automotive retailers can help their customers who are struggling financially while also growing their business. A good place to start is by understanding the economic realities and stressors of today’s consumer. Here are four things you should know about financial insecurity in America.
1. People with subprime credit scores struggle to secure financing
According to an Oliver Wyman study, 57 million Americans have a subprime credit score. What lenders consider subprime varies, but a FICO score below 670 can be a roadblock to securing traditional financing.
Many subprime consumers struggle to secure new loans, credit cards, and/or other forms of traditional financing since many lenders consider them to be relatively high risk. And when they do get approved for lines of credit, they're often met with extra fees and higher interest amounts than their prime counterparts.
With so many subprime consumers in the market, they likely make up a significant portion of your potential customer base. By offering this underserved group an alternative to traditional financing, you can help them get the auto services or parts they need while paving the way to more sales for your business.
2. Many people feel financially insecure
Only 34% of Americans identified themselves as being very financially healthy, according to the 2022 Personal Capital Wealth and Wellness Index. This same study also revealed that factors like personal debt, income, savings, and external circumstances, such as the economy and job market, greatly influence people's perception of financial stability.
Unfortunately, many Americans find themselves stuck when they experience unexpected expenses or a sudden loss of income. According to the Federal Reserve, only 32% of U.S. adults would not be able to cover a $400 emergency.
What’s more, 14% would cover a $400 emergency by using a credit card and paying it off over time. But what if that’s not an option? Those with subprime or below credit will likely have no way of covering an emergency auto-related expense. That’s why offering alternative financing could be key to helping these consumers get what they need while generating more sales for your business.
3. Many consumers struggle to save money
In 2022, 42% of American adults had less than $1,000 in savings, and 25 million American had no savings at all. Millennials were also more likely than other age groups to owe more in credit card debt than what’s in their savings, according to a 2022 Bankrate survey.
When customers don’t have the savings to safeguard against unexpected expenses, offering a way for them to make payments over time can help them get what they need while opening new revenue streams your business.
4. More Americans are living paycheck to paycheck
Among U.S. consumers, 62% earning between $50,000 and $100,000 live paycheck to paycheck, up from 57% in 2021. Younger generations are especially impacted – 70% of millennials and 65% of Gen Z consumers live paycheck to paycheck.
In this financial environment, many of your customers may need payment options beyond traditional financing – options that help them quickly get what they need with as minimal disruption to their monthly expenses as possible. Solutions that help them break big purchases into budget-friendly payments over time can prove especially useful.
Snap Finance can help you attract and convert more customers
Consumers who are financially insecure can often only access auto goods or services through alternative financing options.
Snap Finance has the solution. Snap-branded lending and lease-to-own financing options enable customers of all credit types1 to get what they need now and make budget-friendly payments over time.