Financial Wellbeing Starts with the Car Loan and Doesn’t End There

Credit union auto lending from cu 2.0 and withclutch

According to the Bureau of Labor statistics, transportation expenses are the second largest discretionary spending in a consumer’s budget. The industry is so large, it’s one of the few nationwide ‘trillion dollar’ industries. (Healthcare, food, and housing are the other three.)


Vehicle Expenses are the Second Largest Consumer Category

Consumers tend to think about just the ‘car payment,’ but there’s more to it than that. Between insurance, maintenance, fuel, and other expenses, these expenditures add up quickly. To put it into perspective, the average American household spent $9,737 on transportation expenses—over $9,000 (93%) of that was directly related to their personal vehicles.

Digging in further, the additive cost of ownership makes transportation expensive. Financing charges, insurance costs, fuel, and repair and maintenance. The vehicle payment itself is less than half (41% to be exact) of this expense.

These expenses are often ‘wealth regressive’ as well, i.e. lower income households often:

  • Pay higher interest rates for their loans
  • Can afford only older vehicles that have lower fuel economy ratings, and require more maintenance
  • Yet, drive more miles to commute which in turn drive cost up due:
    • Increased gas expenditures
    • Increased insurance costs
    • Increased maintenance expenses

In sum: it can be very expensive to be poor when it comes to cars.


Cost of Ownership Needs to Be Personalized to Be Meaningful

While a large portion of car buying is emotional, the economics should be easy to understand. Yet, consumer advocacy groups have struggled to help consumers understand the true cost of ownership for a vehicle. Historically this information has been opaque and difficult to obtain on a personalized level. What good is an ‘average insurance cost’ if it’s totally unrepresentative of my true insurance cost?

Even for identical cars, the degree of personalization can massively impact total expenses. Just take the example below looking at large variances in car ownership costs for a 2019 Toyota Camry with 25,000 miles owned over 5 years.

Low Cost High Cost Cost/Year Difference Cause of Variance
Purchase Price $18,800 $19,900 $220 Negotiation Ability
Interest Expense (total) $976

(1.99% APR)


(29.9% APR)

$3,366 Credit History, Financing Channel
Insurance Costs



(rural, 40’s)


(city, teenage)

$3,864 Driving Record, Location, Insurance Carrier
Gas Expense

(15k miles/year)


(highway driving rural areas, 39 MPG $3.00/gallon)


(aggressive city driving – California, 28MPG $3.65/gallon)

$802 Driving Patterns, local gas prices


Hence, dependent on the car owner, the same car could vary by as much as $8,252 each year for a Toyota Camry! Previous attempts to get customers to understand ‘Total Cost of Ownership’ were futile. Total Cost of Ownership is complicated. Consumers struggle to piece together their own financial picture or to understand the complete picture of until after the purchase is made.


The Phone as the Pocket-size Financial Advisor around Car Ownership

So, how can consumers piece together their own financial picture around car ownership? Technology and especially access to disbursed vehicle and car ownership data evolved exponentially in the last years. With inputs, we can now create a holistic picture of both a specific consumer’s expenses as well as her theoretical expenses for any vehicle available for sale.

The crew at WithClutch built APIs to help them identify from a phone number all vehicles owned by an individual. Moreover, they can pull up trade lines, financing terms, rates, and credit history. Therefore, they’re able to provide firm credit offers and financing quotes through an unprecedented minimum number of personally identifiable data points and user consent.

Furthermore, their technology gives them access to driving records, which in turn allows them to identify current insurance expenses as well as generate new quotes. Lastly, they can identify where the user lives and estimate how many miles they drive per year. Knowing all of these details, they’re able to:

  • Estimate truly personalized cost to own for your current car with minimal inputs
  • Identify better offers that make the current car cheaper to own (e.g. through refinancing offers or new insurance)
  • Provide personalized cost to own comparisons to educate new vehicle purchase recommendations

WithClutch’s API-based and AI-powered technology turns any smartphone into a pocket-size financial advisor around car ownership.


Credit Unions Advance to Becoming the Holistic Financial Advisors

These powerful APIs significantly help improve the financial well-being of millions of Americans. Most institutions, unfortunately, have misaligned incentives:

  • Car dealers are unable to gain consumer trust because they’re incentivized to sell a newer vehicle
  • Insurance companies are unlikely to gain consumer trust because they’ll dis-incentivize customers to switch providers
  • For-profit banks are unlikely to want to refinance customers who are making good on payments and instead want to collect the excess interest

Trusted institutions such as credit unions, in contrast, could have a huge positive impact leveraging the technology. Since all loan proceeds directly benefit members, credit unions are incentivized both to help members save money and provide advantageous loans.

By embedding these personalized, ‘subscription-like’ Total Cost of Ownership features into a financial wellness app, credit unions can further drive allegiance to their own brand. Credit unions would advance from being the institutions that provided the loan to becoming the institutions that help its members make financial decisions around car ownership as a whole.


WithClutch and Credit Union Auto Lending

The global pandemic may pose new challenges for credit union leaders. However, these are exciting times! Credit union leaders who are able to take advantage of the unique inflection point will be remembered and celebrated for decades.

For leaders who want to be on the forefront of technology and turn their institutions into the ‘CreditKarma of credit unions’, get in touch with WithClutch now. They’d be excited to borrow some of your time and expertise and involve you as a co-creator in their agile software development process.

Christopher Coleman and Nicholas Hinrichsen went to Stanford Business School before they started a digital car retailer in 2013. The two founders raised $10M and originated thousands of indirect loans for dozens of credit unions before they sold their business to Carvana in 2017. While at Carvana, Chris and Nicholas launched the Sell to Carvana vertical i.e. Carvana’s efforts to buy cars from the public. The two MBAs teamed up with Kirk Drake to support credit unions in their digitization efforts.

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