Earlier this year, used-car retailer CarMax launched a pre-qualification capability that reveals personalized financing terms, including the monthly payment and APR. This new online financing tool empowers customers to shop vehicles nationwide, with no impact to their credit score. Filters such as down payment, length of loan, and monthly payment can be adjusted, showing only those vehicles that meet their budget parameters. According to company executives, budget continues to be top of mind for consumers in the current economic environment of inflation and rising interest rates. CarMax intimated that conversion rates were very high for buyers utilizing the pre-qualification tool.
While online loan applications are nothing new, a pre-qualification tool that provides monthly payment options and APR without affecting the shopper’s credit score could be very valuable for your credit union. The bigger step is reaching customers and informing them about your tools before they start shopping for vehicles. Savvy CarMax leaders took a page from the marketing best practices playbook, with a press release, social media ads, and search optimization ads. End result? Increased loan volume, increased used car sales, and a bevy of data on consumer financial health to guide future pricing and loan rates.
Your credit union might already offer a quality pre-qualification tool, but how are you getting the message out?
Smoothing the path to pre-qualification
Many consumers believe that investigating potential financing on a vehicle will impact their credit scores. This is misleading! On your website, do you provide information to dispel the myths around pre-qualification? This is an important step to encouraging shoppers to check in on financing.
Another area where consumers lack understanding is the difference and benefits of pre-qualification versus pre-approval. While both pre-qualification and preapproval can provide an idea of estimated loan terms, the pre-qualification requires a soft credit inquiry and preapproval often produces a hard inquiry. Pre-qualification also gives buyers a good view of their credit score and how that score impacts vehicle financing. Understanding the role of a credit score in advance of vehicle shopping – and in the privacy on their own screen – avoids a failed loan and embarrassed customer. Using the right words and providing clear consistent education is another check box for checking in on financing.
In fact, providing education on the factors related to improving a credit score can deepen the lender-customer relationship as well as helping that buyer qualify for a better vehicle with a little financial improvement. But, that education needs to start online, before they even reach your site. Use your social media assets to your advantage by providing shoppers with short, actionable advice, directing them back to your pre-qualification page.
Finally, encouraging shoppers to “check in” on their financing prior to shopping for the vehicle speeds the loan closing and gives them a valuable reason to stay loyal to your credit union while in the finance office at the dealership. Use search engine optimization and google ads to target consumers shopping for vehicles to get pre-qualified with your institution so they can make a more informed decision.
As economic concerns continue to build, now is the time to lend additional support to vehicle shoppers considering a new vehicle. Remember, your EFG team of experts is here to help you maximize your auto loan portfolio with valuable products that save your members money while diversifying your revenue streams. We’re not just a provider, we’re a business partner.