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.