Today, credit unions are tasked with adapting older or outdated processes and services to a newer market. Add a pandemic to the mix, and you see a surge in online and mobile banking that will be hard to ignore from now on. And auto lending is no different.
Here are some trends in auto lending to watch for.
Online Car Shopping Trends
With social distancing and increased cleaning protocols, shopping for cars online has become a go-to for those in the market for a new ride.
And once they start that online car shopping process, interested individuals want to make sure they can get financing before they invest themselves emotionally in a car they won’t be able to get a loan for.
More and more, the future of auto shopping and lending is going to be virtual. And that’s why your credit union needs to be ready to embrace the following trends to capture your portion of this audience’s attention and business.
Early Loan Preapprovals
61% of new car financing happens through vehicle manufacturers and dealerships, but the majority of used car financing takes place at banks and credit unions.
This presents an opportunity for your credit union to offer auto loan pre-approvals to members through multi-channel campaigns so you can reach them before they try to finance those loans through other dealerships or financial institutions.
Increase Loan Amounts
CU Management has some compelling insights about how credit unions can play to their auto lending strengths:
“Credit unions tend to go a little bit larger in the average amount financed compared to banks and finance companies…They don’t go out the longest terms, but when you combine their sweet spot of 73 months with low interest rates, credit unions offer the most competitive product in the marketplace, particularly for prime and super-prime customers.”
By increasing loan amounts and offering competitive interest rates, you can give your members the opportunity to treat themselves to a slightly nicer car than they anticipated. You can position it as a post-pandemic opportunity at pandemic-like rates. This will be appealing to your members, especially as they watch gas, home remodel materials, and other prices go up in response to the vaccine rollout and the decreasing COVID restrictions.
Leverage Past Applications for Refinancing
Refinancing has defined many interactions between consumers and financial institutions in the last year, so why not keep that momentum going?
Credit unions can recapture a lot of business by going back through 2019 and 2020 loan applications that were lost or abandoned, and offering those applicants who are members some refinancing options.
Increase Education Efforts
The pandemic gave us all a good look at which areas of our lives – especially those tied to finances – we could use some more education in.
Credit unions are perfectly positioned to offer a wider variety of educational content geared toward different financial situations and age groups. What millennials need right now may not be the same as what Gen Xers needed at that same age. Tailoring your education to more targeted demographics can broaden your credit union’s reach while also appealing more directly to younger generations, who are always looking for more value and insight from expert brands.
Focus on Alternative Credit Data
Many millennials and Gen Zers are not going to have the traditional lines of credit that their parents and grandparents had when applying for loans. For those who are too young to have a well-rounded traditional credit score, take a look at other financial areas such as rental records, utility payments, address consistency, and employment history.
This is a great way to capture a traditionally overlooked population looking for an auto lender.
IMS Integration can help improve your credit union online offerings, starting with web loan applications. IMSI’s online loan applications are designed to incorporate your credit union brand and image and can be designed to collect as much information as you need.
Request a consultation today for more information about our credit union solutions.