New Cars May Drive Opportunity for Banks and CUs

Market research shows that sales for new cars and trucks are expected to grow strongly in 2013, offering banks and credit unions (CUs) an opportunity for growth in auto loan portfolios, as well as an opportunity to engage with customers/members creating a positive relationship experience.  Research recently reported by Polk suggests that new vehicle sales are expected to top 15 million in 2013, moving to 16 million per year by 2016.  If the researchers are correct, then projected sales are set to deliver a 6.6% growth over 2012 sales levels, and with auto companies set to unleash a nearly 50% increase in new vehicle introductions in 2013, there is optimism that sales could exceed predicted levels.

Auto loan volumes at banks and CUs have been “stubborn” over the last few years with most growth still being seen in Used Auto Loan portfolios.  Citing customer hesitations from the slowly recovering U.S. economy, many have been frustrated in finding ways to grow New Auto Loans, but things may finally be ready to change and it is important for both banks and CUs to be ready.  Both financial and auto industry experts have pointed to a pent-up demand for new autos as the average age of vehicles being driven by customers has climbed since the start of the 2007 financial crisis.  Auto companies were certainly not immune to the financial pressures, but with the planned dramatic rise in new vehicle introductions, and an added 60 vehicle redesigns planned for 2013, it seems the new auto market is officially throwing off its crisis mentality and increased demand is predicted.

With the auto companies “gearing up” for growth, and knowing that pent-up demand will help fuel sales, now is the time for banks and CUs to position New Auto Loan products, pricing, and processes.  The auto dealers and other competition will all want to be the answer to customer auto-financing needs, so it is essential that banks and CUs protect their customer relationships by proactively engaging potential new auto loan opportunities.  Pre-approval strategies can be highly effective in times of increasing demand (consider reviewing the frequency of pre-approval offers), as can value-added auto services, such as purchasing services, but New Auto Loans also offer important relationship opportunities.  Many banks and CUs recognize relationship opportunities by offering rate discounts for customers who agree to automatic payments from checking accounts, but now could be a great time to also offer rate match guarantees to customers to provide further value to existing relationships.  Why let current customers go to the competition, when matching an offered rate not only provides interest income revenues, but also reinforces customer relationships for longer-term opportunities?

New Auto Loan processes can also become a differentiator.   Along with pre-approving customers for auto loans, banks/CUs can advertise 10-minute loan processes, instant-answer decisioning, second-look reviews and other process-driven enhancements to provide customers with convenience in support of new auto purchases; all designed to help increase loan volumes and reinforce customer relationships.

Driving New Auto Loan strategy makes sense given market predictions in 2013, and starting product, pricing and process reviews now will ensure banks/CUs are well-positioned to take advantage of the expected growth throughout the year.

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