Categories
Business Growth

Same Store Results vs New Acquisitions in 2015

Contributing Author: Steve KleesCongratulations! 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:

  1. Loosening credit
  2. Growing existing dealer business
  3. Acquisitions

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.

  • Ensure your lending representatives are accessible during dealership hours.
  • Evaluate your turn-around time on loan decisioning and implement processes to speed it up.
  • Provide understandable guidelines on the types of consumers that are eligible for your loans and continuously train F&I managers on where you fit.
  • Implement a quick and efficient funding process.

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.

  • Are there geographic areas where you have higher loan volume than average?
  • Which dealerships are generating the most loan volume or loan applications?
  • Which geographic areas have lower repossession and loss rates than average?
  • Which dealerships fund the majority of their loans with a reliable customer base as far as making their monthly loan payments?

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:

  • Ask for referrals from your existing dealership partners in the geographic area.
  • Determine whether the outlying metro areas are being ignored.
  • Analyze where your competitors lie in the dealership space.
    • Are they in every dealership, or only certain franchises?
    • Which dealerships/what type of dealerships offer your competitor’s loans?

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.

Categories
Business Growth

Subprime Competition is Heating Up!

Eric Fruithandler, Senior Sales Executive, Specialty ChannelAccording to the latest data from Experian and Equifax, subprime market share increased 4.15 percent year-over-year, with independent auto financing capturing the majority of the market.

As the subprime market continues to expand, the industry has also seen more independent financing companies backed by private equity firms pop up. Competition is heating up and lenders are continuing to loosen their standards. While the experts at Equifax see this as a sign of “health” in the sector, many lenders see competition as another hurdle they must face in the quest to build loan volume.

So, how can lenders protect themselves from loss of marketshare?

If financial institutions continue to increase their loan cap which inconsequentially increases APR, eventually consumers will be unable to sustain the high loan payments that come with their new vehicle. In addition, not all lenders are willing to extend a $20,000+ loan to subprime consumers and compete on rate. Rather than falling into the trap of over-extending themselves, financial institutions are learning how to compete on the value of their loan.

In terms of being valuable to their dealership partners, this means:

  • providing accessible lending representatives during dealership hours;
  • having a quick turn-around on loan decisioning;
  • providing understandable guidelines on the types of consumers that are eligible for their loans;
  • implementing a quick and efficient funding process; and,
  • making the F&I manager’s job easier.

Seems pretty straightforward right? You’d be surprised at how many lenders struggle with consistency in these areas. While ease of access and clear guidelines are important in simplifying the F&I process, smart lenders understand that making their loan valuable to the consumer outside of pure APR can significantly alleviate the pressure on the F&I manager and increase the dealership’s PRU.

Of everyone in a dealership, the F&I manager has the toughest job. Consumers walking into the showroom are already interested in buying a car. Consumers in the service drive are there because they need service. For the most part, consumers in the F&I office never even thought about consumer protection products when contemplating the purchase of a vehicle. They walk through the door with defenses raised and skepticism turned on high.

Now imagine the F&I manager was equipped with a loan that provided the consumer complimentary consumer protection products, like a vehicle service contract. Instead of starting the conversation trying to overcome high consumer skepticism with a sales pitch, they are positioned as an advisor. As the F&I manager discusses the type of loan the consumer qualifies for, they have the easy transition into the F&I selling process as they explain all the benefits that come with the loan. At the conclusion, they can then ask if the consumer would like to extend the benefits to the full term of their loan. As you can imagine, this is a much easier sell.

In addition, the value that consumer protection products bring to the table assure the customer that both the dealership and the lender recognize the worth of their business no matter their financial position.  This significantly enhances both the financial institution and dealership’s brand in the eyes of consumers, resulting in increased customer loyalty and referrals. All of this, of course, means increased business and revenue for you and your dealership partners.

With over 37 years of experience in innovating agile consumer protection products that give our partners an edge in the market, EFG is your key to driving business and increasing loan volume. Contact us today to turn the heat up on results.

Categories
Business Growth F&I

Vehicle Dependability is on the Decline! Do You Know How to Leverage this Trend?

Contributing Author: Brien JoyceWith the pent-up demand and looser credit standards, customers have been flocking to dealership lots over the past year and a half. While that trend is expected to continue, dealerships have also seen a much more demanding consumer walk onto their lots. Since the recession, consumers have a tighter hold on their wallet and expect more value for their dollar.

Now, compound their hesitation with the widespread recalls and reports of vehicle failures hitting the news. Not only are customers more concerned with the level of service and value they receive from the dealership, but also with the dependability of available new model inventory.

According to the 2014 U.S. Vehicle Dependability Study from J.D. Power and Associates, for the first time in 15 years, owners of three-year-old vehicles reported more problems than did owners of three-year-old vehicles in the previous year. They attributed this drop in dependability to an increase in engine and transmission problems, particularly on 4 cylinder vehicles.

With vehicle dependability called into question, along with many high profile news stories around the OEMs and recalls, you can bet consumers are going to be even more circumspect when it comes to purchasing their next vehicle. Your dealership partners need a strategy to incentivize potential customers to purchase from them. Keeping in mind that retail sales volume has a significant impact on your loan volumes, think about this statistic from the J.D. Power Automotive Internet Roundtable – today’s car shoppers visit only 1.1 dealerships before making a purchasing decision, which is down from visiting three dealerships just five years ago.

Now think about how many of your dealerships partners are the ones with which consumers choose to do business. Going forward, the best way to keep your share of loan volume is to ensure that your dealership partners successfully sell to this new single-visit customer. But how?

The Answer: Keep it Simple —

  • Be available during dealership hours and not just 9 to 5, Monday through Friday.
  • Provide fast, consistent loan decisions.
  • Be willing to advance on consumer protection products that add value to the loan and take away customer concern.
  • Consider offering complimentary limited warranties that help extinguish customer hesitation.

With vehicle dependability called into question, the ability for your dealership partners to sell vehicle service contracts will be at the forefront of their minds in the coming months. Consumer protection products will not only mitigate customer concern, but also reduce the likelihood of defaults. This is especially important in the subprime space where a vehicle breakdown could cause a consumer to choose between making their monthly payment and repairing their car.

Of course, not all customers have the credit history to afford a loan that takes into account the vehicle cost and the traditional F&I products sold within the dealership. That’s where structuring complimentary limited offerings within your loan can take the lead. This way, the customer still gets coverage on some of the most important parts of their vehicle, your loan is better protected from default, and the dealership has the opportunity to upsell to different coverage levels to increase their profit.

Whether you can structure your loan advance to take the cost of selling F&I products into account, or provide complimentary limited offerings, your loan will stand out and keep you top of mind. Combine this with quality customer service and F&I managers will prefer to sell your loans.

With over 35 years of innovating nimble consumer protection products for dealerships across the U.S., EFG Companies knows how to structure your loan to stand out from the crowd. Contact us today to find out how.