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Brien Joyce Vice President EFG Companies

Contributing Author:
Brien Joyce
Vice President
EFG Companies

Holiday season is here! Will consumers be spending? Recent PwC research says, “yes”. In fact, the PwC 2019 Holiday Outlook shows consumers are optimistic with 86 percent saying they will spend the same or more this year, than in 2018.

But, will this holiday sentiment extend to the automotive industry? According to J.D. Power, the fourth quarter hinges on consumer affordability, rate reductions and manufacturer incentives to clear 2019 inventories.

Prepare, Prepare, Prepare

Unfortunately, credit unions have their work cut out for them.  According to Experian’s latest State of the Automotive Finance Market report, credit unions lost market share in the retail automotive market in the second quarter of this year. Especially glaring was the fall to 26 percent market share for used vehicle financing, previously a stronghold in the sector.

While some pundits claimed the credit unions scaled back their auto originations due to overcapacity, others point to more aggressive efforts among traditional and non-traditional lenders entering the space. Banks increased their used-vehicle market share to 36.3 percent, up 1.7 percentage points from 2018. Non-traditional lenders, including digital providers, also saw an uptick thanks to more consumers purchasing their vehicles online.

Now’s the time to put your credit union in the best position to engage both consumers and dealerships, book the deal, and build some market share of your own.

Double Down on Digital

It’s no surprise that consumers are purchasing more vehicles online. Does your credit union pop up in the searches for automotive financing? And if it does, have you refreshed your online offerings and credit approval process? Your physical location is likely closed when these customers are shopping so make sure your best deal is on the holiday list.

Check Your Reflection

Our communities change every day. Is your credit union still relevant? From the person behind the counter to the online advisor, make sure you position your business as a trusted advisor for your local customer. Now is also a good time to refresh your local demographic data. Has a new employer come to your area bringing new employees? Are younger consumers purchasing homes and renting apartments nearby? Make sure you know your community and target market.

Don’t Forget Your Dealers

Now is the time to make sure you are front and center with your dealers. Update them on the best financing you have to offer. Keep them current on the types of deals you support and your lending capacity. Are you offering longer terms or special compensation for thin clients? Will you negotiate rates in exchange for more cash down? Position your credit union as a strong partner and more deals might come your way.

Differentiate and Diversify

In the end, this all boils down to beating the competition on reaching the right consumers with a compelling offer. You can further protect your auto lending portfolio and increase perceived value with consumers with bundled consumer protection products.

For example, offering consumers a vehicle service contract that comes with mechanical breakdown protection, paintless dent protection, key replacement, vehicle return protection, road hazard tire protection, and total loss refund reflects your value proposition with potential consumers and helps build loyalty with your credit union.

Consumer protection products also have the potential to reduce risk by addressing the consumer’s ability to make their loan payments when life takes a turn. Consider a consumer rebuilding their credit and savings who may be living paycheck to paycheck. For this consumer, a deviation from their monthly budget can challenge their ability to make a car payment. Products such as vehicle return protection with a $7,500 negative equity benefit for the consumer can help bridge the issue to help consumers pay their car loans when the unforeseen occurs, like:

  • Involuntary unemployment
  • Physical disability
  • Loss of driver’s license
  • International employment transfer
  • Self-employed bankruptcy
  • Accidental death

Adding valuable, bundled consumer protection products with upsell opportunities to your auto loan offering provides your loan officers with a strong, market-differentiating value proposition, helping them sell more auto loans, increase your credit union income with each auto loan sold, and grow a more protected volume of loans. They also help prevent consumers flipping to dealership financing options by giving them more value for their money.

As you re-evaluate your position in the market and your expansion strategy, consider making your auto loans more secure and more profitable for both you and your dealer partners with the right consumer protection products.

With more than 40 years of experience in developing market-differentiating consumer protection products, EFG Companies know how to expand your market share while protecting your loan portfolio. Contact us to find out how today.

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