Lending Curve
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Congratulations! You survived the Recession and are now reaping the benefits of an expanding economy as consumers return to auto lending market. Now that vehicle sales are up, and 2015 is almost upon us, lenders are beginning to re-evaluate how to grow their business and gain market share in 2015.
There are normally three methods employed to grow market share in the lending space:
Loosening credit is the least appealing option all the way around because it increases risk. As far as growing existing dealer business is concerned, it’s important to focus on the basics and build from there.
Many lenders actually struggle with consistency in these basic areas of working with dealerships. Therefore, by focusing on providing superior service to the F&I managers, you can significantly differentiate your institution and keep your loan top-of-mind.
In addition, further cement your relationship with your current dealer partners by focusing on making the F&I manager’s job easier and helping dealers deliver more cars.
Encourage dealers to consider you as a primary lending source regardless of market rate, by building value into your loan. Consider advancing more to leave room for the dealers to sell cancellable consumer protection products that help drive dealer profitability. In addition, consider building profitability for both your institution and the dealer by providing complimentary F&I products like a vehicle service contract. This further differentiates your loan because it makes the F&I product presentation process easier and has the potential to reduce risk.
Lastly, it is vital to approach acquisitions from the perspective of quality over quantity. You’ve heard the situation where a lender has brought on numerous dealership partners without vetting them to find out that some of those dealerships don’t provide the type or volume of business the lender had in mind.
To acquire quality dealer partners, you need to understand what you want in a perspective dealer partner. First, evaluate the performance analytics of your existing dealership partners across your geographic presence.
With these statistics in mind, you can determine which geographic areas to expand within, as well as which types of franchise dealers receive the most business. For example, your analysis could reveal that the majority of your loans in Texas are tied to truck sales, and inform you which manufacturer has a higher market share in the area. Then, if you decide to increase your presence in Texas based upon current success in loan volume vs. loss ratio, you could focus your efforts on dealerships that sell that manufacturer’s trucks, either new, or on their large pre-owned lot.
To fully formulate your target list of potential dealership partners:
Once you know your target acquisitions, it’s important to again demonstrate your focus on providing quality customer service and your ability to help your potential dealer partner increase their footprint in the market.
No matter how you plan to grow your market share, everything revolves around your engagement with your dealer partners. The more engaged you are, and the more quality services and options you provide, the higher the likelihood of bringing on more business. With almost 40 years of experience in the auto retail space, EFG Companies knows how to differentiate your institution and grow loan volume. Contact us today to find out how.
A good portion of Experian’s latest State of the Auto Finance Market Report revolved around alleviating industry concerns that the auto market is looking more like it did right before the Great Recession. If you’ve been paying attention to headlines lately, you know that economists are worried about how quickly the subprime market is expanding and are asking if there will be another bubble to pop.
With those concerns in mind, lenders are especially concerned with the upward trend in auto delinquency. According to Experian’s report, finance companies experienced a 2.6% year-over-year increase in 30-day delinquent loans with a total balance of $6 billion. In addition, the top 10 states with the highest delinquency rates account for 32% of the total amount of delinquent loans.
With strong subprime growth and increasing delinquency levels, smart lenders are looking at how to level out their delinquency rates, or at least protect their loan portfolio from this growing risk. While some would argue that the best way to pad the portfolio is by increasing APR, there is another option that benefits the lender, the dealer and the consumer. That option is the use of complimentary consumer protection products.
With consumer protection products, like a vehicle service contract or vehicle return protection, consumers are protected from the high costs associated with a vehicle breakdown, or from the negative financial repercussions of instances like involuntary job loss. This same consumer protection also protects the loan. How? Consumers can continue to make loan payments if they don’t have to reallocate funds to cover costly mechanical repairs or cover living expenses on an unemployed budget.
Dealerships also benefit by setting up the F&I product presentation with a description of the benefits consumers will receive with their loans. This offers F&I managers an excellent springboard into presenting upgrade options or additional products to further protect the consumer. Your loan will essentially turn the conversation from strictly a sales presentation to a rewarding and productive discussion about the benefits of consumer protection products, and the value the dealership is providing.
Don’t feel like your only course of action to combat delinquency levels is to raise rates. Pair your loans with complimentary consumer protection products. They can help protect your loan portfolio, while also protecting your customers and providing your dealership partners with the ability to make additional F&I income.
With almost 40 years of experience in innovating compelling consumer protection products, EFG Companies knows how to strategically place the right product mix with your loan to achieve greater loan volumes. Find out how today!
