Tag: indirect lending

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Business Growth

Five Keys to Success for Subprime Lenders When Expanding to New Markets

Steve Roennau Vice President Compliance EFG Companies
Contributing Author:
Steve Roennau
Vice President
Compliance
EFG Companies

Subprime lenders are in growth mode and rapidly expanding in 2013.  With expansion to new markets comes a myriad of challenges for the lender.  Some of the challenges are faced directly by the lender itself and some possibly by the F&I Managers at the auto dealerships with whom they do business.

Here are five keys to success for the subprime lender when expanding to new markets.

  1. Understand specific state laws and requirements.  Most lenders are likely very familiar with the laws and compliance measures that require attention in order to conduct business in a new market.  For example, making sure your retail installment contract is state compliant is an obvious first step prior to moving in to a new market.  However, if the lender markets its own suite of consumer protection products, it’s important to ensure the product administrator has done its due diligence to secure appropriate state approvals and has made necessary adjustments to its contracts as well.  Handling all the state-specific requirements up front will facilitate a smooth transition to success in a new market.
  2. Know the demographic trends and how they impact buyer behavior.  If a subprime lender is making a move to enter a new market, the demographic study and analysis has already shown a viable business opportunity.  However, do the market indicators for unemployment, the local income metrics, and consumer confidence provide an unique opportunity for lending and the sale of the lender’s consumer protection products?   If so, what is the strategy to capitalize on this new market’s opportunities?  Answering these questions will help a lender tailor a meaningful, successful loan product offering in the new market.
  3. Ensure your consumer protection products are a fit.  Different markets may present opportunities for the lender to differentiate its loan offering.  Ensure the consumer protection product offerings provide a solution to a consumer need in that market.  Be confident that the marketing, pricing and product features speak to the demands of the new market and provide an opportunity to realize a profit.  The right loan offering with appropriate protection products in the market will help drive success.
  4. Delivery mechanisms must be sound.  Once a sound strategy is in place to facilitate the loan transaction and deliver the lender’s retail installment contract, ensure a stable electronic platform is in place to rate, contract and submit the consumer protection products.  The demand for e-commerce has never been stronger, so providing an e-solution to fulfill contracts is essential.
  5. Maintain your brand.  Whether the lender operates with a direct or indirect model, it’s imperative that the lender effectively communicates and manages its brand.  From an engaging and up to date web presence, to SEO, to effective brand reputation management, the lender should pay close attention to its brand and all its brand promises as it looks to expand and grow in to new markets.

EFG Companies has a proven track record in helping lenders expand their reach in to new markets. Contact EFG today to develop a strategy designed to help you realize success as you grow your business.

Categories
Economy

It Doesn’t Matter Whether the Economy is Up or Down

Contributing Author: Steve KleesWith the government shutdown and impending national default, companies and consumers alike are avidly watching for updates on the status of the economy. Will it plunge? No one knows and everyone is talking about it.

But look at it this way, there have always been ups and downs and there always will be. Rather than letting the rollercoaster take you for a ride, concentrate on what you can do to consistently increase loan volume.

Whether the market is on an incline or going through a loop-de-loop, your auto loan is compared with three to five competitors. What do you have to offer to ensure an application pulls through into a loan?

Competing on rate alone puts pressure on your margin and sets a benchmark for a competitor to come in and meet it or beat it. The key to consistently pull through loans is to concentrate on your efficiencies:

Superior Service

  • How quickly does your institution respond to an application?
  • Are your loan officers courteous and respectful when speaking with dealership personnel?
  • Do you instill the value of providing superior service across your institution?

The Value Proposition

  • Does your loan make it easier for the F&I manager to upsell consumer protection products to boost their margin?
  • Does it provide consumers with value beyond interest rate that insulates them from significant impacts to their savings?

You’d be surprised how simply providing quality service establishes lasting relationships with both dealerships and consumers. By focusing on customer service, rather than just numbers and rates, you are more likely to close more loans and increase the number of dealerships presenting your loan.

But beyond customer service, providing tangible value to both your audiences puts you miles ahead of the competition. How do you do this? One of the best ways is with complimentary consumer protection products, such as a limited powertrain warranty or vehicle return.

Complimentary products such as these set the stage for upsell opportunity, making it possible to increase your margins as well as the dealership’s PRU. By providing a valuable service to the end-consumer, it’s easier to familiarize them with the benefits of the product and position the upsell as just another way to extend those benefits.

Of course, the savvy consumer will only believe in the products with the best reputation. That’s why it’s important to shop around for the best product administrator. Good administrators, such as EFG Companies, have established themselves in the industry as being customer-centric. When evaluating potential administrators, pay attention to their claims paid, and timeliness of payment. Administrators like EFG know that a good product doesn’t just benefit a lender, or just a dealership, it benefits everyone. And, they make sure everything from product development to administration and claims adjudication follows this principal.

So, how do you fortify your business to stay on track in a volatile economy? Focus on efficiencies within both your application processes and supplement your loan with consumer protection products backed by that same focus on efficiency.

Get off the roller coaster and chart your own course with EFG.

Contact us today!

Categories
Banner Economy

Faced with Economic Lemons? Lemonade Sure Tastes Good.

Faced with Economic Lemons?

Contributing Author: Steve KleesAs President Obama and Congress nail out budget sequestration for 2013, businesses across the country are scrambling to determine how this will affect their productivity.

Political Pundits are anticipating the sequester will cost the economy upward of one million jobs in 2013 and 2014. While this might make you cringe when thinking about possible affects to the sub-prime auto loan market, it’s important to remember that coming out of a recession, there is pent-up demand.

According to recent stress tests conducted by Fitch Ratings, the U.S. auto market can withstand a hypothetical recession and material declines in used vehicle recovery rates. However, rather than just trying to withstand economic hardships, your competitors are looking for ways to turn those stresses in their favor.

How do you stand-out from the crowd among F&I managers beyond low interest rates?

Consider the following scenario.

An F&I manager has a customer who qualifies for financing through your institution and a competitor. While the competitor’s rate is slightly higher, they also offer complimentary consumer protection products that make their loan more stick (not to mention the opportunity to make money through upsell). Which rate do you think the F&I manager will sell?

Structuring your loans with F&I products that reflect current economic conditions and consumer needs not only make it easier for finance managers to sell, but also:

  • attract and retain dealership partners;
  • increase year-over-year auto loan volume and financial control;
  • expand per month income;
  • reduce default rates; and,
  • decrease repossessions and collection costs.

With over 35 years in administering consumer protection products and working hand-in-hand with dealers across the U.S., EFG Companies knows how to structure your loans to be more attractive in the F&I office with F&I products custom-tailored to match your dealership-partner’s demographics.

Find out how EFG can turn economic stress into increased revenue streams today.