- Bank of America, which has 22 million active mobile users, added functions to its smartphone application to help people shop for cars and set up financing before visiting a dealer. The bank is testing the service in areas surrounding its Charlotte, NC, headquarters before a nationwide rollout, according to a statement by the company.
- The bank developed the app because most people start their car-buying research online, said Michelle Moore, the bank's head of digital banking. Tire kickers can use the app to start shopping for a particular vehicle at a nearby dealership or to arrange financing beforehand.
- After selecting a vehicle and applying for a loan through the mobile app, a user will get a decision within seconds followed by an official emailed approval letter.
Mobile apps are resource-intensive to build and maintain, so Bank of America is looking to optimize its investment with features designed to attract new users and give existing ones another reason to come back.
As mobile banking becomes a basic service for most financial institutions, one way to expand use is to reach customers at critical times when they need money for major purchases, like a car or home. Bank of America's move is likely intended to attract a younger audience that's tech savvy and beginning to make these major life purchases that typically require taking out a loan. Millennials, in particular, are more comfortable than other age groups using mobile apps to handle banking transactions, according to Forbes.
Last year, Bank of America was among the major banks that cut branches in favor of expanding more affordable digital channels like mobile apps and ATMs. The bank once had more 6,000 branches before the financial crisis of 2008, but that number fell to 4,629 by Q3 of last year.
While Bank of America likely will find a receptive audience for its car-buying app, the bigger issue facing the automobile industry is affordability, according to credit-data firm Experian. The average monthly payment for a new vehicle loan rose 2.6% to $506 in Q4 from a year earlier, while the average new vehicle loan reached an all-time high of $30,621. As the gap between new and used vehicle loans widens to a record $11,292, more credit-worthy customers are looking to buy used cars based solely on the longer-term affordability factor. Marketers should keep in mind this trend may naturally dampen demand for new cars down the road.