U.S. Bank can now provide loan funds to car dealers immediately after a loan contract is finalized by the bank, according to a Tuesday (Aug. 9) press release.
The bank has helped more than 800 auto dealers receive real-time funds following a pilot program in June. U.S. Bank said in the release it expects to deliver the solution to additional dealers in the months ahead.
“While the traditional ACH payment method for funding auto loans can take several days — especially when sales are made outside of banking hours — real-time payments to dealers are fast, secure and available seven days a week, including holidays,” the release stated. “Auto dealers using real-time payments gain a competitive advantage, with greater control over cash flow and improved contract-in-transit metrics, a key performance indicator for auto dealers and their employees.”
John Hyatt, president of dealer services at the bank, said in the release that interest among car sellers in the solution has “grown rapidly” in recent weeks, with many dealers especially enthusiastic about finalizing deals during the evenings and on weekends.
Auto lenders are facing a credit crunch, especially those who lend to the subprime market.
Read more: Credit Crunch Looms for Auto Lenders as Paycheck-to-Paycheck Pressures Intensify
Credit Acceptance, a company that helps car dealers offer financing, warned last week about near-term prospects of seeing timely payments on recently-extended loans. The company said its metrics showed a decline in collection rates to 67.1%, compared to its forecast of 67.6%.
That forecast applied to consumer loans assigned this year, the company said, adding that the decline would impact cash flows.
Meanwhile, prices for both new and used cars reached a record high in June, according to Kelley Blue Book, which said a new car in the U.S. sold for an average of around $48,000, while the price of a used car is around $28,000.
See more: Supply Chain Snarls Will Keep Car Prices High, Morgan Stanley Analyst Says
These rising prices are primarily due to global supply chain issues, which are hampering deliveries for car companies such as GM and Toyota.
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