Steve Roennau
Vice President
Compliance
EFG Companies
The National Automobile Dealers Association predicts new unit vehicle sales to top out at 17.7 million in 2016, which equates to less than 1% increase from the 17.5 million units in 2015. Industry experts across the board are expecting auto sales to plateau because of rising interest rates, increased regulatory compliance costs, and wage and income pressure. But that’s not to say there isn’t money to be made.
17.7 million units is still vastly greater than the 10.4 million unit sales from 2009. If anything, it marks one of the strongest recoveries the retail auto industry has ever experienced. With that in mind, there is still plenty of opportunity to increase loan volume, especially in the subprime market.
That’s right, I said there is opportunity in the subprime market. Even with rate increases and flat wage growth, the opportunity to increase loan volume and better protect your loan portfolio is there for those willing to look for it.
With the Federal Reserve slowly raising interest rates, everyone is on alert to see if and how economic setbacks will affect the subprime market. After all, economic downturns tend to hit the subprime demographics first, with sustained impact.
Before you jump the gun to tighten your subprime lending standards, consider this:
Loans that offer complimentary consumer protection products can help you address the challenges of a stagnant market and delinquency control, while also providing additional streams of revenue.
Said another way:
The dealerships you work with have a variety of other subprime lenders from which to choose. What do you have to incentivize F&I managers to present your loan offering to their customers? Why should the customer choose your loan offering? You can’t always offer the lowest rate (especially with the Fed raising interest rates), so what makes you different?
Financing options offering complimentary F&I products with upgrade opportunities provide significant benefits to all parties involved.
For F&I Managers, starting the F&I process with a loan paired with complimentary consumer protection products puts the them in a positive position with their customers, enabling them to sell consumer protection products as upgrades, thus improving dealership profit potential.
For consumers, having consumer protection products on their auto loan allows them to avoid unexpected expenses that may inhibit their ability to make their car payment.
As far as your institution is concerned, upgrade options provide increased potential for profit opportunity through additional streams of revenue. In addition, by protecting the customer, your institution has the potential to significantly mitigate loss exposure.
EFG Companies structures its products and services to not only provide value to you, but also dealerships and the end-consumer. Our unmatched client engagement model goes well beyond simple product innovation to mitigating liability through superior claims processes, and continuous training and compliance practices. Contact us today to turn economic stress into another avenue for profit.