The Challenge: Differentiation!
In 2013, nonprime, subprime, and deep-subprime new vehicle loans accounted for 27.5% of the market. Today, they account for roughly the same, at 26.37% of the marketshare. However, when you look at the risk distribution between total new and used units, you get a different picture. For the total finance market, nonprime, subprime, and deep-subprime loans account for 41.48% of the marketshare, according to the latest State of the Automotive Finance Market report from Experian.
As unit sales increased over the last few years, so did loan volume. This happened across all credit tiers. However, now that we are in a period of flat auto sales, lenders are presented with two challenges: increased competition and higher delinquency rates. In the second quarter, we saw 60-day delinquency rates for both auto loans and leases increase by five basis points. It’s important to ask: how you are tackling these challenges presented by today’s market?
Consider This:
Loans that offer complimentary consumer protection products can help you address the challenges of increased competition and delinquency control, while also providing additional streams of revenue.
Said Another Way:
The dealerships you work with have a variety of other subprime lenders from which to choose. What do you have to incentivize F&I managers to present your loan offering to their customers? You can’t always offer the lowest rate, so what makes you different?
Financing options offering complimentary F&I products with upgrade opportunities provide significant benefits to all parties involved.
Benefits to F&I Managers:
Initiating the F&I process with a loan paired with complimentary consumer protection products puts the F&I manager in a positive position with their customers, enabling them to sell consumer protection products as upgrades, thus improving profit potential.
Benefits to Consumers:
Consumer protection products allow consumers to avoid unexpected expenses that may inhibit their ability to make their car payment.
Benefits to Lenders:
Upgrade options provide increased potential for profit opportunity for lenders, and by protecting the customer, mitigates loss exposure.
With more than 40 years of consumer protection product insights, EFG Companies works side-by-side with subprime lenders like you to administer the right mix of F&I products providing the greatest return to you and your dealership partners. Contact us today to learn how.
