The latest report from Experian on the State of Auto Finance Q2 2021 revealed that banks and captives continued to gain auto loan market share while credit unions continued a 3-year trend of losing market share. Combined, banks and captives account for approximately 60 percent of the overall share, while credit unions slipped to 18.21 percent. The health of a consumer’s financial stability is clearly on display as loans ranked prime+ were nearly 62 percent of total loans while total subprime dropped below 20 percent and deep subprime hit record lows.
According to Experian, subprime financing will remain at near-record lows while prime will increase across all transaction types for the remainder of the year. Loan amounts and payments will remain at near-record highs and will likely hit record-highs for used vehicles. Overall outstanding balances will increase, and 60-day delinquencies will decrease.
Opportunity for credit unions
Surprisingly, the U.S. consumer actually became financially stronger during the pandemic, boosting personal savings by nearly 2X of disposable income. This strong balance sheet enables credit unions to focus on maximizing their customer engagement time, with discussions of supporting and maintaining that wealth.
Savvy credit unions focus on providing strong counseling and guidance to members on constructing the best auto loan with the optimal protection products to protect their investment and their bank account. What are the best options for each member? How will they use the vehicle?
How are you reaching potential members with this guidance? As digital buying habits become more ingrained and hybrid workstyles seem here to stay, training your staff on how to engage with members online through your website, social media, mobile app, etc. will be essential in the coming months.
There is still opportunity for credit unions to reverse the slide in market share and increase their auto lending portfolios. The key is to getting back in touch with their members. Invest in staff training, enabling your team to effectively engage with members where they are – on the website, on your app, via phone, text, or chat. Your website and mobile app should be viewed as a banking platform, not just a source of information. A recent study by Cox Automotive revealed that two out of three vehicle buyers are purchasing online – which means they are shopping for financing online as well.
Regardless of what platform you use to engage with your members, the biggest opportunity you have to increase market share is to serve as a facilitator and partner, not a data-focused lender. Due to the pandemic, many people found that their financial positions have changed over the past two years. If their balance sheet is healthy or if they have a vehicle to trade in, they may be in a position to put down more equity to reduce their monthly payments. However, unemployment-impacted credit scores can also change the financing position of some members. View each buyer as a unique opportunity, not a data point in a loan portfolio.
Lastly, in the competition for auto loan volume, it’s important to remember that competing on rate simply won’t cut it anymore. The new playing field is on value – what can members receive with your institution that they can get nowhere else? How are you taking care of them? Separate yourself from the competition with competitive consumer protection products that provide member protection when they need it most – when their vehicle breaks down or when they experience unforeseen job loss. Giving members valuable protection on their auto loan differentiates your offering and protects your loan portfolio from defaults and delinquencies.
At EFG Companies, we work with credit unions to provide complimentary lifetime limited powertrain protection, as well as vehicle return protection as a market differentiator. Additionally, credit unions offer EFG’s suite of consumer protection products to further protect their members’ auto loans, including vehicle service contracts, appearance protection, tire & wheel protection, and more.
Get back in touch with your members and drive auto loan volume with EFG Companies. With more than 40 years of experience helping clients navigate changing markets, EFG Companies knows what it takes to increase your auto loan volume and market share. Contact us today to get started.