The following is an excerpt from “Checking & Loan CSI,” a presentation I’ll be conducting for the Michigan Credit Union League Lending & Marketing Conference and Utah’s Credit Union’s Annual Meeting.
90.8% of American households have at least one car in their garage. According to the Federal Reserve Bank of New York, 107 million Americans have auto loan debt … that’s about 43% of the entire population. The sad thing is that, while we all have “answer phones” in our pockets, roughly 53% of car buyers still finance their loans at the dealership.
Car loans are the third largest American debt (behind housing and student loans) yet most consumer still don’t know that they have options.
The funny thing is that people don’t even like the darn dealer! In 2012, The Consumer Federation of America and the North American Consumer Protection Investigators reported that, out of 360,538 complaints, auto-related issues topped the list … and had for several years!
Folks, we have some work to do.
The way I see it, there are only four reasons why anyone would get their loan through the car dealer:
- Convenience: There’s just something intoxicating about that new car smell! As high as the price tag is, a car is still an emotional buy. When someone finds a car they love on a Saturday, they want to be driving it that night.
- Ignorance: Studies show that many people don’t even know they have an option.
- Pressure: No one plays the pressure game better than the auto industry … and the Finance Team are some of the best.
- A good deal: In full disclosure, I financed my car (with a credit union) through the dealer. If you know what you’re doing and you push them, sometimes the F&I person can find better deals when banks and credit unions are bidding for it.
What can you do?
Be constant and be creative. You cannot over-communicate to your people that you provide auto loans.
- Pull credit and offer to refinance
- Host classic car “drive-ins” in your parking lot
- Be on all touch points: ATM, statements, in-lobby, mobile banners, etc.
- Shoot for at least eight touches per year
The #1 Tip in the Consumer Reports “New Car Buying Advice” is ….
“Set up your loan in advance.”
Getting pre-approved can:
- Focus the vehicle search
- Save money
- Reduce the dealership pressure
Be a Resource
There are many ways that you can help with the car purchase aside from a great rate. We’ve set-up entire car-buying micro-sites that help customers to:
- Find a vehicle
- Get NADA valuations on trade-ins and new purchases
- Get CARFAX reports
- Learn about GAP insurance
- Find insurers
- See your rates
- Easy access to auto loan calculators
- Auto buying, maintenance and repair blogs
- Most importantly … Apply online to get Pre-Approved
Get the Next Car
Whether you are heavy in indirect lending or not, you can grow your direct auto loan portfolio when you focus on getting the NEXT auto loan through direct channels.
- How quickly do your current customers pay off their auto loans? When you know the trend, you can start communicating for the next loan in time.
- Communicate early and often. Remember, you can’t make them need a car, so you need to be there when the time comes.
- Be there when they need you. Are you easy to access? What electronic processes do you have in place when they are shopping rates at 10PM or find that car on Saturday afternoon?
- Get them pre-approved (Are you seeing a theme here?)
Treat Them Better Than the Dealers
You already know that people would rather deal with you than with the dealer. Give them every reason to do it.
- Send hand-written thank you notes
- Show them how to save money
- Consult on GAP, Don’t Push
- Conduct two-month follow-up calls
While intoxicating, that new car smell doesn’t last. You can guarantee that, in a few years, they will be ready for another new car. Build the relationship now so that they will think to come to you first, rather than the dealer.
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