3 Ways to Buy Vehicles with Crypto

Dealerships that set themselves up to accept cryptocurrency will benefit from being able to accommodate customers who want to use their crypto to pay for, or finance, their vehicles. This blog post covers the most common ways that customers use crypto to buy cars.
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Couple purchasing car with crypto

Vehicle affordability is becoming a real issue for many car shoppers. According to Kelley Blue Book, the average price of a new vehicle has topped $48,000, and the average price of a used vehicle is over $28,000,according to Cox Automotive.

How can consumers afford these high prices? Increasingly, with cryptocurrency. Close to 50 percent of Millennials own cryptocurrency (Pipslay), while 28 percent of Gen X and 23 percent of Gen Z own cryptocurrency (Investopedia).

Dealerships that set themselves up to accept cryptocurrency will benefit from being able to accommodate customers who want to use their crypto to pay for, or finance, their vehicles. The most common ways that customers use crypto to buy cars include the following.

Purchase Outright

Approximately 19 percent of vehicle sales are cash purchases, according to Experian’s State of the Automotive Finance Market report from 2021. That percentage might be higher if more dealers accepted cryptocurrency. According to the CNBC Millionaire Survey, half of Millennial millionaires have 25 percent or more of their wealth in cryptocurrencies.

I spoke with one dealer who had a customer that wanted to buy two cars for his two daughters, and he wanted to pay with Bitcoin. When the salesperson told him that the dealership didn’t accept Bitcoin, the man walked out. He didn’t want to go through the hassle of selling his crypto, converting it into dollars, transferring it to his bank and then arranging another transfer to the dealership. He wanted to pay with Bitcoin.

As the crypto market recovers and crypto adoption becomes more mainstream, expect even more car shoppers to ask for this option.

Down Payment

In a recent poll by Redfin, 12 percent of first-time homebuyers sold cryptocurrency to help save for their down payment. That percentage is probably similar, if not higher, among car buyers.

Many crypto owners do not want to part with their cryptocurrency as they consider it a long-term investment. For these buyers, one option is to have them use some of their cryptocurrency as collateral for a loan just large enough for the down payment; then have them pay cash for the monthly payments.

Finance Entire Vehicle

Approximately 60 percent of all new hires within dealerships are Millennials. Most of this generation is aware of cryptocurrency, and many are crypto enthusiasts. As a salesperson interacts with a customer, the topic of financing and payments arises organically. Part of that conversation should include the option to finance the vehicle with a crypto-collateralized loan.

As vehicle prices rise and with a possible recession looming, dealerships will encounter more customers who do not qualify for loans,or who only qualify for sub-prime loans. In particular, many Millennials and members of Generation Z have good-paying jobs but thin credit files.

Collateralized loans are the ideal solution, as many crypto investors want to hold their cryptocurrency for the long-term. By using cryptocurrency as collateral, car buyers can get better interest rates. For example, a customer who finances their vehicle with a crypto-collateralized loan may qualify for an interest rate two percentage points lower than they would have otherwise qualified for.

According to a June 2022 survey by Deloitte, nearly 75percent of U.S. retailers plan to accept cryptocurrency as payment in the next two years. More than half of those retailers plan to have third-party payment processors convert the crypto into fiat at the time of the transaction, so they don’t plan to keep the cryptocurrency. This strategy eliminates the risk of owning a volatile asset.

It’s clear that cryptocurrency is here to stay, and that customer demand is driving merchant adoption. For consumers, using crypto to help pay for, or finance, a big-ticket item such as a vehicle is a no-brainer. Hopefully soon, more dealerships will be able to accommodate them.

3 Ways to Buy Vehicles with Crypto
Fred Brothers

Prior to co-founding Cion Digital, Fred served as the Executive Vice President and Chief Innovation Officer at FIS, a Fortune 500 provider of financial technology. Fred was a member of the senior executive team with responsibility for driving innovation and growth within FIS and its clients through internal reinvestment, corporate development, strategic partnerships, acquisitions and venture investments. He managed FIS’ venture capital portfolio, was a member of the company’s development investment committee and represented FIS on corporate boards.

Prior to FIS, Fred was founder and Managing Partner of eCom Advisors, a FinTech strategy consulting firm. eCom’s clients include many of the industry's largest banks and credit unions, solution providers, and investors.

Before eCom, he headed strategy, product, relationship management and customer operations for CheckFree (acquired by Fiserv), which he helped to grow revenue from $2 million to $1 billion.

Fred holds a business degree in finance and marketing from The Ohio State University.