Category: Business Growth

Smaller Tax Refunds to Bolster Competition

Post author By efgmarketing
Post date February 19, 2019

Contributing Author:
Brien Joyce
Vice President
EFG Companies

It’s tax season and that typically means big business for those operating in the retail automotive space. Dealers and lenders alike benefit when consumers flock to dealerships in March and April with tax refunds in hand.

However, this year the IRS is reporting about an eight percent decrease in the average tax refund. Having already processed more than 13 million tax returns, the average refund is landing around $1,865.

What can that buy when it comes to vehicles? If we go by the standard of putting 20 percent down on a new vehicle and at least 10 percent on a used vehicle, $1,865 doesn’t go very far.

According to Forbes and USA Today, the average new car costs $36,000, and used cars are retailing at $19,657 on average. That means this year’s tax refund isn’t even close to covering the down payment for a new vehicle, and consumers will still need to come up with about $1,000 to meet the 10 percent minimum for a used car down payment.

What does this mean for auto lenders? Most likely, fewer consumers will be shopping for vehicles this spring, and those that are in the market will likely be shopping for used vehicles. As the pool of consumers shrinks, lender competition should increase.

Business Growth

2019 Outlook: Competition, Leadership and Customers

Post author By efgmarketing
Post date January 10, 2019

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.

Business Growth

Up Your Response Time for the Win!

Post author By efgmarketing
Post date December 12, 2018

Contributing Author:
Mark Rappaport
President
Simplicity Division
EFG Companies

Automotive OEMs rate vehicle performance by the time it takes to go from zero to 60 in seconds. This is a measure of energy conversion – fuel, spark, and movement. While this is a mechanical situation, a comparison can be made to business response times. While fuel is a potential auto loan customer, the spark is a call from a dealer partner, and movement is how quickly your lending team responds to lock down the deal. Have you measured your lending team’s zero-to-60 response time? In this hyper-competitive lending climate, response time truly means the difference between a win – and a lost opportunity.

A recent report, published by Auto Finance News’ parent company Royal Media, analyzed 6,200 dealer evaluations to identify core traits which prompt dealers to choose one lender over another. One component of the report tracked callback time. On average, credit analysts returned calls in 65 minutes. Prime loan applications generated a response time within 56 minutes. Subprime application response time lagged to within 75 minutes, according to the report. In comparison to credit unions, banks and finance companies, captives had the fastest call back time at 62 minutes.

Is there a distinct difference in a lender’s response time based on a customer’s creditworthiness? Of course, there could be extenuating circumstances impacting these response times. Is the type of application outside the lender’s target portfolio? Is the call coming from a preferred dealer who offers only prime applications to specific institutions? The data can be sliced numerous ways. However, given the large sample size, the report bears attention.

Tags Auto Finance News, Royal Media