Tag: Cox Automotive

Categories
Economy

Play to Your Strengths for Success

The end of 2023 is on the horizon and lending in the retail automotive market seems a bit topsy turvy. Let’s consider a few data points:

  • August jobs report reflected an additional 187,000 jobs – but the unemployment rate jumped unexpectedly.
  • The Federal Reserve has paused interest rate increases for the time being – but inflation rose 0.6 percent in August to 3.7 percent, its biggest monthly gain of 2023.
  • While it seems the economy is cooling, the average interest rate on a new car is 14.09 percent and 14.34 percent for a used car.

The car buying consumer is in the midst of these juxtapositions. More people are employed than before the pandemic, but the ‘value’ of their paycheck continues to be hit hard by inflation. Availability of new and used vehicles is improving, but the ‘cost’ of a loan feels exorbitant, pricing many people out of the market. And, if the buyer has a vehicle to trade with a balance owed, the impact of negative equity may come as a surprise. According to Edmunds, the average negative equity value of auto trade-ins was $5,445 in April 2023, up nearly 24 percent compared with the previous year.

As a lender, what options are available to your team to continue to grow a strong lending portfolio while keeping customers out of a potential delinquency position? Here are some maneuvers that require a sharp pencil but should result in a win-win for both you and your customer.

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Categories
Business Growth

There’s Still Opportunity for Gains

The latest report from Experian on the State of Auto Finance Q2 2021 revealed that banks and captives continued to gain auto loan market share while credit unions continued a 3-year trend of losing market share. Combined, banks and captives account for approximately 60 percent of the overall share, while credit unions slipped to 18.21 percent. The health of a consumer’s financial stability is clearly on display as loans ranked prime+ were nearly 62 percent of total loans while total subprime dropped below 20 percent and deep subprime hit record lows.

According to Experian, subprime financing will remain at near-record lows while prime will increase across all transaction types for the remainder of the year. Loan amounts and payments will remain at near-record highs and will likely hit record-highs for used vehicles. Overall outstanding balances will increase, and 60-day delinquencies will decrease.

Opportunity for credit unions

Surprisingly, the U.S. consumer actually became financially stronger during the pandemic, boosting personal savings by nearly 2X of disposable income. This strong balance sheet enables credit unions to focus on maximizing their customer engagement time, with discussions of supporting and maintaining that wealth.

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Categories
Business Growth

The Early Bird Tactic to Growing Your Auto Loan Volume

According to the FDIC, cash is readily at hand as a record $2 trillion in cash hit the deposit accounts of U.S. banks since the beginning of the pandemic. With interest rates near zero, net interest margins have narrowed. Financial institutions would love to issue loans, but there are few opportunities to grow right now. Auto loans are a frequent go-to solution, but the pandemic has added a few wrinkles to that tried-and-true tactic.

Used car values typically decline during a recession, raising concerns about negative net equity on typically long-term 84-month loans. But analysis from Edmunds reflects there could be more demand for used vehicles versus new, as the cost of new units continue to rise and manufacturers continue to fall behind on production schedules.  

How can a credit union capitalize on the opportunity to grow their auto loan portfolio? The first step is to reach the car shopper early in their search. By the time a consumer visits a dealership, they are likely to have conducted an average of 13-14 hours of research. Offer proactive, pre-approved loans to members along with assistance in selecting the best deal for their credit position. Partner with members in their buying journey rather than waiting for them to come to you.

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