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Brien Joyce Vice President EFG Companies

Contributing Author:
Brien Joyce
Vice President
EFG Companies

It’s no surprise to anyone after a challenging 2018 auto lending market that 2019 will have many of the same speed bumps. Rising interest rates, tightening credit, and rising new vehicle prices all combined to make last year difficult. The good news is that 2019 will bring some opportunities to better the odds of success.

Creative Competition

Competition is heating up in today’s flat auto lending market. Lenders who pulled out of subprime are re-evaluating that decision. However, in order to compete, lenders have found that they must slash rates in contrast to the Federal Reserve rate increases. As this is not sustainable, lenders must find ways to differentiate their auto loan offerings outside of rate. One way to accomplish this is through the use of complimentary consumer protection products.

Loans that offer complimentary consumer protection products can help you address the challenges of increased competition and delinquency control, while also providing additional streams of revenue. They differentiate loan offerings with consumers by providing valuable benefits. For example, a vehicle service contract can help significantly reduce the cost to repair a vehicle after a breakdown, keeping that vehicle on the road and consumers current on their auto loans, while protecting their bank accounts. Additionally, lenders have the opportunity to upsell consumers to greater/longer levels of coverage, increasing non-interest-bearing income.

Changing of the Guard

There is also a changing of the guard at the CEO level in the financial industry. Younger leaders are open to out-of-the-box solutions to traditional auto finance challenges, like delinquencies. These leaders are evaluating other options to protect their loan portfolios outside of APR and loan terms.

Along with different approaches to finance challenges, these younger leaders have vastly different styles of communicating, leading, and engaging with customers and employees. Embrace these changes because the Millennial generation will soon outnumber the Baby Boomers. There is also a great opportunity to learn from these leaders who understand Millennial consumers’ purchasing habits.

Cultivating Customer Loyalty

Just as dealers are focused on customer retention, lenders must look at increasing customer loyalty. Consider offering special promotions to existing mortgage or credit card customers to increase the customer portfolio. Lenders must become more educated and confident in presenting consumer protection products in a consistent manner, generating higher penetration rates, additional profit, protection for the consumer, and an additional reason to stay in contact.

Lastly, lenders are making themselves more accessible to consumers, encouraging more input and a two-way conversation. While Millennials prefer digital communication, they also demand working with providers who put their interests first. Lack of customer service will not only lose a customer, it will also result in a negative review on any number of public review sites. Put a human face on auto lending, meet the customer’s needs, and provide on-going support. Attention to these details will put you in position for a profitable 2019.

With more than 40 years of experience in the retail automotive industry, EFG Companies can help your institution stay at the forefront of the changes affecting your industry today. Contact us today to learn how.

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