Categories
Business Growth

Building Credit During Life’s Changes

Brien Joyce Vice President EFG Companies
Contributing Author:
Brien Joyce
Vice President
EFG Companies

It’s that time of year when many folks are looking forward to high school or college graduation, a new or first time job, or possibly a marriage. Exciting times for sure! These life-changing events are opportunities to establish or improve credit. And, purchasing a vehicle can be one of the intersecting activities during these life changing events. As a lender, you play an integral role, and have an opportunity to build a life-long relationship with new customers.

The first opportunity lenders have to work with new customers is often the teen years. An early savings account can transition into a secured credit card. Once the teen turns 18, they can apply for an unsecured card. But have you considered working with that early driver on a car loan as well? A first car purchase can do wonders for establishing credit. Even if the parents are listed as the primary on the loan, adding a teen can introduce them to the world of credit and begin to establish a credit score. Plus, the parents might appreciate the assist on educating their teen.

College graduation is another life milestone where credit and car loans can intersect. As the young adult embarks on their future, their transportation needs might change. Graduate school or a new job in another city demands a dependable vehicle. In addition to establishing credit with a car loan, this is a great opportunity to educate the young buyer on the value of vehicle service contracts (VSCs) or other protection plans. Be prepared to get down to basics on these options and clearly explain their benefits and value. Your young customer will be very price sensitive – but also concerned about the costs of unexpected repairs. Be sure your team is prepared to provide scenarios that match the young adult’s phase of life.

Categories
Business Growth

Say Goodbye to 0% Interest

Mark Rappaport President Simplicity Division EFG Companies
Contributing Author:
Mark Rappaport
President
Simplicity Division
EFG Companies

After three years of marginal interest rate hikes, auto lenders and dealers are saying goodbye to zero percent financing offers. According to Edmunds, the average interest rate on new car loans climbed to 5.7 percent in March, representing a 5 percent year-over-year increase in interest rates.

Also in March, zero percent interest offers fell to 7.4 percent, representing an 11 percent year-over-year decrease.

Lenders that relied upon low interest rates to sell paper, now have to find different methods of differentiating themselves in the market. That’s why, according to CU Direct, credit union auto loan market share surpassed both banks and captives in 2017. Considering all the benefits credit unions offer members aside from rate, this spike in market share makes sense.

Other lenders could learn from the credit union model of diversifying the benefits they offer their customers to increase auto loan originations. Differentiate your institution beyond terms and interest rate with consumer protection products, such as limited powertrain protection, a vehicle service contract, or vehicle return protection. Products like these provide consumers with more value beyond interest rates and loan terms, while providing lenders with additional non-interest-bearing income potential.

Categories
Business Growth

Are You Appealing to Millennials?

Brien Joyce Vice President EFG Companies
Contributing Author:
Brien Joyce
Vice President
EFG Companies

Millennials are in the market to buy cars. Are you in the market to lend to them?

According to Cox Automotive, Millennials are on pace to account for 40 percent of all vehicle sales by 2020. While it seemed like Millennials would never enter the market the way preceding generations had, this demographic is quickly making up for lost time.

Most of the Millennials with buying power today entered the job market around 2008 with record high student loan debt. Jobs were beyond scarce. High quality talent from Gen X and Boomers had flooded the market due to a markedly higher unemployment rate. It was virtually impossible for a recent college graduate to compete with a more experienced Boomer or Gen Xer for that entry-level job. Everyone was willing to work for less just to get by. These economic conditions made all those milestones of becoming an adult seem that much further away for Millennials. They deferred student loans, went back to school, moved in with their parents, and created innovative ways to save money.

A decade later, Millennials have a much greater ability to buy a vehicle, buy a house, get married and have children. However, their past experiences have greatly impacted their current buying habits. According to Cox Automotive:

  • 83 percent say an affordable monthly payment is very important when selecting a lender.
  • 39 percent financed their vehicle through a lender directly.
  • 54 percent prefer to research financing options online.