It’s official. Auto sales have plateaued. Dealerships across the U.S. are reporting low sales numbers in comparison to last year. Manufacturers have increased incentives, but no one’s taking the bait. Looking at these headlines, it all looks like doom and gloom. But, let’s take a step back for a second.
According to Automotive News, the auto industry sold 17.5 million vehicles last year, representing a seventh straight year of growth. When put in that perspective, a plateau at 17.5 million vehicles doesn’t seem too bad.
Yes, vehicle sales aren’t hitting manufacturer projections, but seriously, how long did they really think sustained growth was going to continue? We’ve been in one of the longest economic expansions in U.S. history; the economy was bound to slow down at one point.
With that perspective in mind, economic indicators continue to be strong. National unemployment has hit its lowest level since May 2007. We’ve seen strong jobs gains in recent months. According to CNN, wages rose 2.5 percent in the past 12 months, and the median price of a home has risen to $236,400. Lastly, consumers are still taking on debt. According to the Federal Reserve, consumer credit rose 4.8% annually in February.
Clearly, there is still plenty of business available. This time of relative calm, with no abrupt economic changes, is the perfect time for auto lenders to catch a breath, regroup and re-address their go-forward plans with regards to loan volume.
During the accelerated market expansion, more lenders moved into auto lending across all credit tiers. Now, with so much competition for loan volume, strategic lenders are evaluating how to generate sustained customer and dealership loyalty.
We’ve all seen more lenders invest heavily in mobile app development, while also expanding their online resources dedicated to helping consumers obtain credit. On the dealership side, lenders have been buying more aggressively, but that aggressive buying simply isn’t sustainable.
So, once you have the customer or dealer in the door, what are you doing to make them comfortable enough to stay? One way to accomplish this in the auto lending space is through the use of consumer protection products.
On the surface, consumer protection products do exactly what their name suggests, they protect consumers from the financial ramifications of vehicle breakdowns, theft, minor damage, and even loss of income. These benefits alone are enough to entice consumers, but there are more layers to uncover.
The products help dealerships achieve one of their top goals, increasing back-end margin. How? It’s simple. When a lender offers a complimentary, limited version of a consumer protection product, the perceived value of that product is already built in to the loan. But, by making it limited protection, it’s possible for dealers to generate increased need for more protection, resulting in increased product sales and upgrades in the dealership.
By providing complimentary, limited consumer protection products on their loans, lenders appeal to both consumers and dealers, but what does this have to do with customer retention?
Consumer protection products offer lenders the opportunity to increase their communication points with consumers throughout the auto loan lifecycle. For example, with a vehicle service contract or maintenance plan, the lender has all the information necessary to craft messages to their customers about maintenance reminders, or information on how to preserve their vehicles’ value. If a customer has vehicle return and submits a claim because of job loss, lenders have the opportunity to reach out to their customers with tips to maintain their credit. Using these communication techniques, lenders have the opportunity to increase their engagement with their customers and foster long-term loyalty.
Lastly, consumer protection products also offer lenders complete control when it comes to compliance, as well as an increased level of protection for their auto loan portfolio from the risk of default and delinquency.
With more than 40 years in administering consumer protection products, EFG Companies knows how to structure your loans to cultivate long-term relationships with dealers and consumers.
Find out how EFG can turn economic stress into increased revenue streams today.