According 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.
