We have a paradox! More consumers are returning to the dealership to get out of their old vehicles; yet, there are more decade-old cars on the road today than since the depths of the recession in 2009.
If you’ve been following the news for the past two years, or even just the past month, there is not a doubt in your mind that the economy is improving and consumers are returning to dealerships. Both new and used car sales are up, and lenders across all credit tiers are seeing an uptick in loan volume.
According to the latest “Automotive Market Trends” analysis from Experian, the percentage of vehicles on the road predating the 2001 model year has reached its highest level since 2009. In fact, vehicles in that age group made up more than 28.3 percent of all vehicles on the road. To put this in perspective, before the recession, in 2008, that age group only made up 22.1 percent of vehicles on the road.
It’s understandable that during the worst of the recession, consumers held off on making big purchases like vehicles. With mass layoffs and companies filing for bankruptcy left and right, everyone was concerned about jobs and economic stability.
But now that the economy is expanding, shouldn’t consumers be trading up for a newer model?
According to Melinda Zabritski, Experian Automotive’s senior director of automotive credit, “While the growth in early model vehicles on the road is slowing, getting the most out of the vehicle they purchase still appears to be top of mind for consumers.”
After the recession F&I managers were faced with a more informed and demanding consumer. But what few have taken into consideration is that this could be a good thing. With consumers hyper-vigilant about stretching their dollars, and getting more value from the companies with which they choose to do business, dealerships and lenders have the opportunity to create lasting relationships by aligning with their needs.
The consumers sitting across from the F&I manager are knowledgeable and concerned about the difficulties involved in maintaining older model vehicles. Credit-challenged consumers especially feel the strain of costly mechanical breakdowns and most certainly understand the choice between fixing their vehicle and making a car payment, and therefore the benefits consumer protection products can provide.
By structuring your subprime loans with the option of consumer protection products like a vehicle service contract, you have the opportunity to differentiate your loans from the competition with both F&I managers and consumers. Depending on credit score, and income to debt ratios, many F&I managers find it difficult to secure enough financing to cover both the price of the vehicle and their F&I benefits. By considering an offer with limited complimentary consumer protection products structured within your loan, you can equip finance managers with an easy way to start the F&I conversation by emphasizing the value they are providing to their customer and capitalize on upgrade options to boost their bottom line.
With almost 40 years of experience in structuring successful consumer protection products, EFG Companies knows how to leverage consumer trends to successfully impact your business. Find out how today!