3 Crypto-Friendly Methods for Purchasing Cars
For many prospective automobile buyers, vehicle affordability is becoming a serious concern. The average cost of a new car has reached $48,000, according to Kelley Blue Book, and the average cost of a used car is above $28,000, per Cox Automotive.
How are customers supposed to pay these astronomical prices? more so with cryptocurrencies. According to PipSlay, nearly 50% of Millennials and 28%, 23%, and 23% of Gen X and Gen Z, respectively, are cryptocurrency owners.
The ability to accommodate consumers who wish to use their cryptocurrencies to pay for or finance their vehicles will be advantageous to dealerships that set themselves up to take Bitcoin. The following are the most typical methods which clients utilize cryptocurrency to purchase automobiles.
Purchase Direct
According to Experian’s State of the Automotive Finance Market study from 2021, 19% of vehicle sales are made in cash. If more merchants accepted cryptocurrencies, that percentage might be greater. The CNBC Millionaire Survey found that 25% or more of Millennial millionaires’ wealth is held in cryptocurrency.
I spoke with a dealer about a customer who wanted to use Bitcoin to pay for two cars that he wanted to buy for his two kids. The man left the dealership after the salesperson informed him that it did not accept Bitcoin. He didn’t want to deal with the trouble of having to sell his cryptocurrency, convert it to dollars, transfer it to his bank, and then set up a second transfer to the dealership. He desired to make a Bitcoin payment.
Expect many more automobile buyers to request this option as the cryptocurrency market rebounds and acceptance increases.
The down payment
Redfin conducted a survey recently, and 13% of first-time house purchasers reported selling cryptocurrencies to raise money for a down payment. Similar, if not higher, percentages apply to car buyers.
Many Bitcoin owners view their investment as a long-term one and do not want to part with it. One possibility for these buyers is to use some of their cryptocurrency as collateral for a loan that is just big enough for the down payment, and then have them pay cash for the monthly payments.
Finance the entire car
Millennials make up about 60% of all new recruits at dealerships. A large portion of this generation is knowledgeable about and interested in cryptocurrencies. The subject of financing and payments naturally comes up throughout a salesperson’s interactions with customers. The possibility of using a crypto-collateralized loan to finance the car should be discussed as part of that discussion.
Dealerships will encounter more consumers who do not qualify for loans or who only qualify for sub-prime loans as vehicle costs rise and a potential recession looms. Many Millennials and members of Generation Z, in particular, have well-paying occupations but weak credit histories.
Given that many Bitcoin investors wish to keep their cryptocurrency for a long time, collateralized loans are the best option. Automobile buyers can receive lower financing rates by using cryptocurrency as collateral. For instance, a consumer who uses a crypto-collateralized loan to pay for their car can be eligible for a two percentage point cheaper interest rate than they otherwise would have been.
In the next two years, approximately 75% of U.S. shops expect to accept cryptocurrencies as payment, according to a Deloitte report from June 2022. More than half of those retailers do not intend to store the cryptocurrency, instead planning to have third-party payment processors change the cryptocurrency into fiat at the moment of the transaction. Owning a volatile asset is no longer a danger with the help of this method.
It is obvious that cryptocurrencies are here to stay, and consumer demand is what is driving business adoption. It makes perfect sense for consumers to use cryptocurrencies to finance or assist in paying for expensive items like cars. Hopefully, soon, they’ll be able to use more dealerships.
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