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Business Growth

Pre-Qualification Boosts Car Loans

Earlier this year, used-car retailer CarMax launched a pre-qualification capability that reveals personalized financing terms, including the monthly payment and APR. This new online financing tool empowers customers to shop vehicles nationwide, with no impact to their credit score. Filters such as down payment, length of loan, and monthly payment can be adjusted, showing only those vehicles that meet their budget parameters. According to company executives, budget continues to be top of mind for consumers in the current economic environment of inflation and rising interest rates. CarMax intimated that conversion rates were very high for buyers utilizing the pre-qualification tool.

While online loan applications are nothing new, a pre-qualification tool that provides monthly payment options and APR without affecting the shopper’s credit score could be very valuable for your credit union. The bigger step is reaching customers and informing them about your tools before they start shopping for vehicles. Savvy CarMax leaders took a page from the marketing best practices playbook, with a press release, social media ads, and search optimization ads. End result? Increased loan volume, increased used car sales, and a bevy of data on consumer financial health to guide future pricing and loan rates.

Your credit union might already offer a quality pre-qualification tool, but how are you getting the message out?

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Business Growth

How’s Your Online Platform?

Did you feel a bit of a shift in auto lending recently? Two data points have emerged that have the potential to change the landscape of auto financing for credit unions. First, the Experian Q4 2022 Auto Finance Market Report revealed that credit unions now capture nearly 25 percent of new loans and experienced the highest growth within the auto lending market at the end of last year. Melinda Zabritski, Experian’s senior director of automotive financing and author of the report also stated that larger vehicles like SUVs comprised more than 60 percent of new vehicle financing, with no signs of slowing down, prompting average monthly payments continue to reach new highs.

The second data point involves how those consumers are purchasing their vehicles. McKinsey recently issued a report entitled Disruption and Innovation in US Auto Financing highlighting that auto financing is no longer a separate silo in the car buying process. Researching, buying, financing and delivery are now one experience.  It must be easy on the customer and it’s likely highly reliant on digital.

These two data points should prompt you to take a close look at your credit union’s online platform. Maybe it’s time to implement a “mystery shop” on your website’s auto lending experience. Go through the process of researching an auto loan, estimating payment, submitting an application, and reaching out to your team through the website. If you have a chat feature, try it out for yourself and check your customer relationship management (CRM) tool to see what actually happens with that inquiry. Taking an unbiased view of the member’s experience can give you actionable insights that turn into revenue.

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Business Growth

The Impact of EVs on Auto Lending

Things are looking pretty rosy for credit unions in the auto lending space. According to the Experian Q4 2022 Auto Finance Market Report, credit unions now capture nearly 25 percent of new loans and experienced the highest growth within the auto lending market. Payments and loan amounts also increased year-over-year in 2022, adding more revenue to credit unions auto loan portfolios. Credit unions remain the best option for many consumers with rates at 5.5 percent versus banks, financing companies and other types of lenders.

In the used car space, credit unions have pulled ahead to become the number one option for financing with greater than 30 percent market share. Terms and rates increased across all types of credit segments while loan amounts and payments also increased. As with new loans, credit unions also offered the lowest rates at roughly 7 percent versus other financing options. But amid all the good news, 60-day delinquencies ticked up to above pre-COVID levels for the first time since 2018. For some segments of the economy, money woes are growing.

Opportunities in EVs on the horizon

 While sales of U.S. passenger vehicles fell in 2022, the number of electric vehicles (EVs) sold rose by a remarkable 65 percent, an increase of almost two thirds compared to 2021. EVs accounted for 5.8 percent of all new cars sold in the US, an increase from 3.1 percent the year prior. Industry projections expect the number of electric vehicles sold in the US will surpass the 1-million mark in 2023. This growth will be driven by OEMs increasing inventory, improved charging infrastructure, and affordability. The average price of an EV sold in the US last year was $61,448, a 5.5 percent decrease compared to 2021.