Congratulations! 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:
- Loosening credit
- Growing existing dealer business
- 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.