According to Edmunds, interest rates on new-vehicle loans are expected to soar to their highest point in eight years. In an interview with F&I and Showroom Magazine, Jessica Caldwell, Edmunds Executive Director of Industry Analysis, stated, “We’re starting to see a trickle-down effect from the rate increases happening at the federal level. The Fed rate hikes directly affect unsubsidized loan rates offered by third-party lending institutions such as credit unions and banks, and, as a result, we’re seeing loans that were formerly between 2 percent and 3 percent being pushed up into higher APR brackets.”
New vehicle APR averaged 5.2 percent in February, representing a 4.9 percent year-over-year increase. Let’s not forget that we are expecting more rate hikes from the Federal Reserve in the coming months.
Combine this rate increase with a plateau in retail auto sales, and we can expect lenders to become more aggressive to shore up their dealer relationships. At the same time, dealers are highly attuned to customer retention and brand enhancement. To differentiate you institution and grow loan volume, consider how you are helping dealers address their concerns.
Evaluate your processes from the point of view of building a relationship:
- Do you instill the value of providing superior service across your institution?
- Are your dealer partners well versed in how you fund and your funding requirements?
- How quickly does your institution respond to an application?