A few years ago, you may have been one of the few lenders in your area aggressively offering subprime loans. While the automotive market was struggling, you had the advantage of being one of the only subprime options available to those consumers who were in the market to buy. With limited supply, you had better opportunity to increase your profit margins with minimal effort.
Now, the tables have turned. The subprime market expanded exponentially in 2013. According to Automotive News, executives at General Motors stated that in December, subprime accounted for 7.5 percent of their sales volume.
As more big banks and captives enter the ever-expanding subprime market, you no longer have the same market advantage with Dealers. In essence, we’ve left the seller’s market and entered a buyer’s market. With so many available options, consumers have a better opportunity to shop for the best rate and terms. Naturally, smaller subprime lenders will have a harder time competing on rate alone with larger institutions.
Whether direct or indirect, it’s time to move past rate-only marketing strategies and compete on the value of your loan or your institution. Dealerships and consumers alike are more likely to work with lenders that make their lives easier. For dealerships, this means a quick turn-around on loan approvals, availability during dealership hours (not just bank hours), and providing a loan that consumers will find valuable.
It is actually possible to succeed at captivating both consumer and dealer audiences at the same time. Loans offering complimentary, short term or limited F&I products that reflect a dealer’s consumer base position them to effectively increase profit and customer retention. Consumers will be more confident with doing business with the dealership and in their financial future. In addition these loans may benefit you by helping to mitigate potential loss.
For example, if a customer experiences a mechanical breakdown within the first six months after purchasing a vehicle, they could potentially struggle with the financial burden of paying for both extensive repairs and their monthly auto loan payment. With a six-month complimentary vehicle limited vehicle service contract, that burden could be significantly reduced, allowing them to repair their vehicle without putting a significant strain on their finances and affecting their ability to make their payment on their car loan.
The complimentary product also makes it an easier conversation for the dealership up to give their customers the option to upgrade to potentially the entire length of the loan. This protects you, the customer, and significantly increases dealership profitability.
To determine your value to your dealership partners, conduct an internal audit of your loan closing procedures with these questions in mind:
- How quickly do we respond when the dealership submits an application?
- Are we always available when an F&I manager needs us?
- Are we courteous and professional when working with a dealership?
- Do we provide solutions to help our dealership partners succeed?
- Do our loans give the dealership additional credibility with their customer base?
In this highly competitive market, your value proposition is your differentiator. By focusing on enhancing the value of your loans through good customer service and targeted F&I products, you can significantly increase efficiencies for both for you and your dealership partners.
With over 36 years in innovating and implementing proven go-to-market strategies in the dealership space, EFG Companies understands the importance of your value proposition. Which is why EFG structures its products and services to not only provide value to you, but also dealerships and the end-consumer. Our unmatched client-engagement model goes well beyond simple product innovation to mitigating liability through superior claims processes, and continuous training and follow-up.
Find out how EFG can help you break through the competition. Contact us today.
