Tag: credit unions

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Business Growth

Pre-Qualification Boosts Car Loans

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?

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Business Growth

Hedging a Seven-Year Auto Lending Bet

According to credit bureau Experian, 19 percent of new-vehicle debt and 11 percent of used-vehicle loan terms were 84 months in 3Q 2022. By comparison, Experian data revealed that only 11 percent of new-vehicle borrowers and 4.1 percent of used-vehicle borrowers in 3Q 2018 were on the hook for an 84-month auto loan. That’s seven years of debt on a vehicle that begins to depreciate the minute it’s driven off the lot. Outside of lending terms, how is your credit union hedging its bets in the automotive lending space?

Rising vehicle costs, rising inflationary interest rates and continued concerns about the economy have prompted buyers toward lower monthly payments and longer-term loans. Lenders are also willing to offer pre-approved rates at upwards of 96-months on the strength of interest-derived revenue and low delinquency rates. But, how long can that last?

The state of auto lending is not a one-dimensional picture. Let’s look at some details to get a better view of the rewards – and risks – of long-term auto loans.

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Business Growth F&I

Preparing for 2014

Eric Fruithandler, Senior Sales Executive, Specialty Channel2013 is almost over and 2014 is upon us!

How did you fare in meeting your 2013 business goals?

How about preparing for 2014 initiatives?

Throughout the year we saw competition heat up as larger lenders got back into the subprime market, forcing underwriting standards to loosen across the industry. As larger banks and credit unions began offering more pre-crash terms and pricing on subprime auto loans, smaller institutions that focus on subprime lending have struggled to retain organic growth and keep their customer portfolio filled with well-qualified customers.

To regain market-share and outperform organic growth in 2014, subprime lenders need a two-pronged strategy to compete with increased competition for loans.

Insulation

The first step is to insulate your business from big lender competition. How do you do this? By focusing on your strengths! Those big lenders are still very wary of the subprime market; if there’s the slightest chance of significant volatility, they will jump ship. However, because you’ve weathered the storm through the Great Recession, you know how to manage more volatility in the market.

Part of the reason subprime auto lenders survived was because of their focus on customer service. By fortifying relationships with dealers and customers, and being flexible in tailoring their loans to meet consumer needs, those subprime lenders found a way to flourish in one of the toughest economic downturns in U.S. history. That strong focus on customer service will set you apart as competition increases. Throughout 2014, continue to ask:

  • How can we increase efficiency and courtesy in responding to applications?
  • How can we provide more value to both our dealership partners and the end consumer?
  • How can we increase transparency within our parameters to ensure our dealership partners know which customers qualify for our loans?

Attraction

The second step in the strategy is to make your auto loans more attractive for greater organic growth. This goes hand-in-glove with insulation as you cannot make your loans more attractive without good customer service. Concentrate on providing tangible value to dealerships by helping dealership personnel present more qualified customers by ensuring they understand your standards, and by responding quickly and efficiently to all applications.

Differentiate yourself beyond terms and pricing with consumer protection products, such as a vehicle return program, a vehicle service contract, or a limited powertrain protection plan. Products like these boost your bottom line, your dealership’s margins and protect the pocket-book of the loan applicant.

By focusing on customer service, flexibility and value, it is possible to tailor your portfolio to perform better in 2014. With over 36 years serving as an industry innovator of consumer and vehicle protection programs, EFG Companies is committed to the continuous development of innovative products and services paired with go-to-market strategies and execution support across a multitude of channels.

Find out how we can help increase your loan volume and performance while providing additional upsell opportunities to accelerate revenue growth. Contact EFG today!