Category: Business Growth

2019 Outlook: Competition, Leadership and Customers

Post author By efgmarketing
Post date January 10, 2019

Contributing Author:
Brien Joyce
Vice President
EFG Companies

It’s no surprise to anyone after a challenging 2018 auto lending market that 2019 will have many of the same speed bumps. Rising interest rates, tightening credit, and rising new vehicle prices all combined to make last year difficult. The good news is that 2019 will bring some opportunities to better the odds of success.

Creative Competition

Competition is heating up in today’s flat auto lending market. Lenders who pulled out of subprime are re-evaluating that decision. However, in order to compete, lenders have found that they must slash rates in contrast to the Federal Reserve rate increases. As this is not sustainable, lenders must find ways to differentiate their auto loan offerings outside of rate. One way to accomplish this is through the use of complimentary consumer protection products.

Loans that offer complimentary consumer protection products can help you address the challenges of increased competition and delinquency control, while also providing additional streams of revenue. They differentiate loan offerings with consumers by providing valuable benefits. For example, a vehicle service contract can help significantly reduce the cost to repair a vehicle after a breakdown, keeping that vehicle on the road and consumers current on their auto loans, while protecting their bank accounts. Additionally, lenders have the opportunity to upsell consumers to greater/longer levels of coverage, increasing non-interest-bearing income.

Business Growth

Up Your Response Time for the Win!

Post author By efgmarketing
Post date December 12, 2018

Contributing Author:
Mark Rappaport
President
Simplicity Division
EFG Companies

Automotive OEMs rate vehicle performance by the time it takes to go from zero to 60 in seconds. This is a measure of energy conversion – fuel, spark, and movement. While this is a mechanical situation, a comparison can be made to business response times. While fuel is a potential auto loan customer, the spark is a call from a dealer partner, and movement is how quickly your lending team responds to lock down the deal. Have you measured your lending team’s zero-to-60 response time? In this hyper-competitive lending climate, response time truly means the difference between a win – and a lost opportunity.

A recent report, published by Auto Finance News’ parent company Royal Media, analyzed 6,200 dealer evaluations to identify core traits which prompt dealers to choose one lender over another. One component of the report tracked callback time. On average, credit analysts returned calls in 65 minutes. Prime loan applications generated a response time within 56 minutes. Subprime application response time lagged to within 75 minutes, according to the report. In comparison to credit unions, banks and finance companies, captives had the fastest call back time at 62 minutes.

Is there a distinct difference in a lender’s response time based on a customer’s creditworthiness? Of course, there could be extenuating circumstances impacting these response times. Is the type of application outside the lender’s target portfolio? Is the call coming from a preferred dealer who offers only prime applications to specific institutions? The data can be sliced numerous ways. However, given the large sample size, the report bears attention.

Tags Auto Finance News, Royal Media

Business Growth Economy

Preparing for a Subscription Economy

Post author By efgmarketing
Post date November 28, 2018

Contributing Author:
Brien Joyce
Vice President
EFG Companies

Rapid changes are taking place in the way people buy things. The U.S. is moving toward a subscription-based economy, driving companies to focus less on individual sales, and more on gaining recurring customers. This trend is seen across industries, in companies like Netflix, Blue Apron, Spotify, Amazon, and now BMW, Mercedes, Audi and General Motors. But, how big is this market, and who is signing up for these subscriptions? More importantly, how does this subscription-based economy impact the retail automotive industry and the lenders who support it?

The subscription e-commerce market has grown by more than 100 percent per year over the past five years, with the largest retailers generating more than $2.6B in sales in 2016, up from $57.0M in 2011. E-commerce subscribers are most likely to be 25 to 44 years old, to have incomes from $50,000 to $100,000, and live in urban environments in the Northeastern U.S. Women account for 60 percent of subscriptions. But men are more likely to have three or more active subscriptions suggesting that men value automated purchasing to save time. These numbers track well with the potential prime auto loan customers that lenders crave, and they are reflective of the coveted Millennial consumer base.

There are numerous reasons why Millennials utilize subscription models, but one of the primary reasons is that this generation sees a greater financial benefit in accessibility over ownership. Nearly 60 percent of Millennials would prefer to rent a home than buy one. They are also the leading proponents of the sharing-economy (e.g., Uber) – thanks to their financial position. Aside from record amounts of student debt, Millennials earn on average 20 percent less than Baby Boomers did at the same stage of life, according to the Federal Reserve. This disparity is the driving force for why Millennials did not run out and buy vehicles and homes as soon as they graduated high school and college.