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Joel Ohman is the CEO of a private equity-backed digital media company. He is a CERTIFIED FINANCIAL PLANNER™, author, angel investor, and serial entrepreneur who loves creating new things, whether books or businesses. He has also previously served as the founder and resident CFP® of a national insurance agency, Real Time Health Quotes. He also has an MBA from the University of South Florida. ...

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Reviewed by Joel Ohman
Founder, CFP® Joel Ohman

UPDATED: Feb 8, 2021

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Audi has an outfitted A7. Toyota has an outfitted Lexus LS 600h. And Google has a small fleet of self-manufactured vehicles, all fully functional without a driver.

Driverless, or autonomous cars, are vehicles that are capable of navigating and driving without any direct human input. The vehicles use radar, GPS, and other computer technologies to asses road conditions, directions, other drivers, and anything else that a driver must handle when driving a car.

This technology will completely change both the automobile and transportation industry. Not only will they lower automobile related accidents, as about 90 percent of accidents are due to human error, but they will alter how consumers view the act of driving.

The future of driverless is here, no longer logging hours in a distant lab, but on streets and highways. Since 2009, Google’s vehicles have already logged over 400,000 miles in various terrains.

The real question is whether the consumer market, the auto loan lending industry, and auto manufacturing companies are ready for the massive change.


The Institute of Electrical and Electronics Engineers (IEEE), a professional association for the advancement of technology, projected in late 2012 that autonomous vehicles will be “the most promising form of intelligent transportation.”

The IEEE said that within the next three decades, 75 percent of cars on the road will be driverless.

Jeffrey Miller, IEEE member and associate professor in the computer systems engineering department at University of Alaska Anchorage, said the IEEE prediction, although extreme, is not a bold prediction.

“Think about vehicles that existed in the ‘80s compared to vehicles that we have today,” he said. “Navigation systems, seatbelt sensors, automated cruise control, and assistive parallel parking are just a few of the technologies that have been included in vehicles that originated from the ITS community.”

Miller said the next logical step will be a vehicle that drives itself.

In order to achieve the IEEE prediction, an entire consumer market would have to change in less than three decades. Miller said this change is “absolutely” possible. Other markets have changed within a few years, and other markets have appeared in the same short timeframe, such as Google’s market of search engine optimization and online advertising.

Miller said the vehicles will likely hit the market within the decade and a majority of the vehicles will be driverless in three decades.

Auto Loan Lenders

It is often overlooked how vast of an impact automobiles have on a consumer market, but one industry that will be affected is the auto lending industry.

New and used car sales are a $600 billion yearly business in the United States. If the face of the auto manufacturing business changes then the financing industry for new auto loans will likely change as well.

Although it is too early for statistical projections, newer technology could lead to a short-term burst in auto sales. But when the increase settles down, and fewer consumers total their vehicles in accidents due to human error, sales rates could stagnate.

A drop in sales would not only negatively affect auto manufacturing companies, but auto loan lenders and personal financing companies as well. Although new sales of the automatic vehicles would shortly increase auto loans originations, in the long run, less room for consumer error would create fewer purchases.

David Jacobson, CEO of auto loan aggregator company, GrooveCar, said part of the issue could be because there is no evidence how long the driverless vehicles will last, and how effective they will be. He questioned what the true collateral of this technology is going to be.

“When you finance vehicles with an unknown technology and unknown future value, you don’t know what the value is going to be, so it affects the credit risk,” Jacobson said.

With leased vehicles, an auto loan lender must assess the vehicles’ worth in the next few years and that gives the loan equity.

Jacobson said the risk for driverless vehicles will be similar to hybrids. When they entered the consumer market, finance companies worried about the risk because they were unsure of the durability of the vehicles, the batteries in particular.

“What is the collateral value on this loan?” Jacobson questioned. “The credit risk is going to have to be carefully assessed.”

He said due to the lack of information about driverless car technology and durability, the auto loans will be similar to personal loans, which carry higher risks.

Consumer Hurdles

Auto research and development is a huge business, and in 2009, $73 billion was devoted to it.

Some of the development money was used for conceptual technology, but other funding was used in easily implemented technology that is more commercial. Dan Gage, director of communications and public affairs at the Alliance of Automobile Manufacturers, said a large percentage of consumers think driverless vehicles are something out of “The Jetsons,” but in reality, there are a wide variety of driverless features already in use.

“If you take some of the technologies and combine them together … a fully automated vehicle is not too far into the future,” Gage said.

But consumer acceptance must be reached. Gage said Auto Alliance members are less worried about automatic vehicle sales right now, and instead are focusing on development and legislation.

Currently, only three states have laws permitting driverless cars: Nevada, Florida, and California.

“As companies are innovating and addressing the challenges, we want to make sure legislation isn’t going to limit the technologies,” Gage said.

He said strong efforts to open up legislation cannot force the public to accept the vehicles.

“The government can try to mandate vehicles but if the public doesn’t want to buy them, the public won’t buy them,” he said.

Surveys tend to disagree about the public’s view. According to a 2012 survey by J.D. Power and Associates, one-third of drivers are open to autonomous technology.

But the survey found that price is a significant factor. Once survey respondents found that autonomous technology would add $3,000 to the cost of the vehicle, the one-third dropped to one-fifth.

Part of the concern, similar to the issues for hybrids and electric vehicles, is the initial sticker price. Autonomous features might be available in all price points, but the overall vehicle’s cost is still unknown. Although Gage said he cannot predict the cost of an autonomous vehicle, if the cost of electric and hybrid vehicles is any indication, they will be significantly more than regular vehicles.

Consumer Education

Sharon Silke -Carty, executive editor of AOL Autos, had the opportunity to test drive several different versions of driverless technology. The first time she drove a car with adaptive cruise control she was on a track, but eventually she drove the car 65 miles to her job. The time on the freeway was taken over by the cruise control technology.

Although she became more accustomed, the first time was jarring.

“The first time you do it, you just have to cross your fingers and hope that it works,” Silke-Carty said. “It’s a bit of a mental game. But once it works, it’s great.”

In a similar fashion that she experienced, she said automakers will need to allow consumers to test-drive the product before they move forward with a purchase. Automakers will need to enact consumer education in order to increase awareness and acceptance for driverless technology.

“Of course you can’t reach every consumer that way, but it does help with word-of-mouth,” she said.

Miller agrees that consumers will have to trust the technology.

“If the driver or passengers do not have faith that the vehicle is going to stop before hitting another, the driver will be tempted to take over control and not allow the driverless technology to perform as it should,” he said.

Fading Nostalgia

Increasing awareness is not the only barrier for auto manufacturers, but rather to handle the possible decline of auto nostalgia and passion.

“In the auto industry, they need people to believe passionately in their vehicles,” Silke-Carty said. “That’s why people buy them. They have to find a way to keep that passion there but provide that technology that can be useful for a lot of people.”

Jacobson agrees and said the auto industry will be financially affected because there will be less interest in automobiles themselves.

“The driving experience is going to become less important for people. It already is,” he said.

He said the nostalgia of vintage cars — how cars perform and how the gasoline smells — will no longer be around. Instead, consumers will only be interested in accomplishing their goals of getting to work or activities, rather than how the vehicle performs on the drive.

“Nostalgia is going to become less important, not in my generation but the next generation,” Jacobson said.

One way around the loss of nostalgia is an on-off switch. Silke-Carty said it is possible to toggle driverless technology on and off, where it can be a regular car at one moment, and a driverless car the next. She said this will retain the “fun-to-drive” mentality for auto enthusiasts.

Silke-Carty said in order to look forward to technological advancements in the auto industry, consumers should open their minds. The future holds great technology, even though it is different.

Jacobson agrees.

“The world is changing in the automotive industry,” he said. “The next 15 or 20 years is going to be mindboggling.”

Thumbnail by Steve Jurvetson, available at Wikimedia Commons.