Working on a hunch, I conducted a very unscientific study. I counted all the commercials during last night’s episode of “Glee” to see how many were either commercials related to cars or commercials related to financial services. By my rough count, about 26% of the commercials fell within either of those two categories; an amount which I think is fairly representative of a normal hour of primetime television as well as being a normal distribution of television advertisements.
The reason for this study was to raise the issue of the dearth of auto finance advertising. More than one out of four ads that aired during “Glee” last night were for cars or banking products; yet none featured car loans themselves.
There are more registered vehicles in the U.S. than people. Yet I see “Professional drivers on a closed track” more times in automobile advertisements than I see commercials touting interest rates or lease terms. I see Regis and Kelly hawking the great customer service of TD Bank, yet they never talk about car loans. Capital One has Jerry Stiller promoting the interest rate being offered by the bank on its checking accounts. But no mention of auto finance.
I understand that there is a bifurcation within the auto finance industry. Most loans are originated indirectly to consumers via car dealers. But why should that stop a lender or manufacturer from advertising its loan products?
I was on a conference call last week and an auto lender mentioned that the affinity between credit unions and its members can be so strong that the members will go into a dealership requesting a loan from their credit union. Can’t the same be true for Capital One? Or GM Financial? Or Bank of America?
The absence of auto finance-related advertisements is an open door for any lender that is willing to take a chance and try to grab marketshare, at a time when the car business is rebounding strongly and auto finance is growing.
Gary — Thanks for the perspective. I think one thing that’s different between now and 1975 or 1982 is the sheer size of the market. According to data from the Federal Reserve, finance companies owned or managed $11 billion worth of motor vehicle loans at the end of 1975 and $44 billion at the end of 1982. Know what the number was at yearend 2008? $250 billion.
You can check out the latest Fed G.20 report here, and you can pull loads of historical data using the Data Download function here.
I think the lack of consumer advertising by banks for auto finance is because: 1) most the bank market is indirect as you stated; 2) each bank – even the largest – has a relatively small share of the market making national advertising expensive relative to revenues generated; 3) banks generally view the investment of dollars in consumer marketing as an alternative to further investment in dealer relationship management staff and dealer incentives and those dealer-oriented marketing expenditures have historically been viewed as more productive investments than broad consumer advertising.
Rob, you are absolutely on target. And the more that the marketing dollars are tied into incentives for someone, the better the results!
Rob – I think that you make some great points. I appreciate you taking the time to add them to the post.
I still think that banks and other auto finance organizations are missing an opportunity. Regardless of whether the loan is originated directly to the consumer or indirectly via a car dealer, consumers have a choice. They can walk into a dealership and ask for a loan from Bank X or Credit Union Y. Let’s face it, in most cases, the differences between loan programs offered by auto lenders are not that different. The dealer controls where the consumer gets his or her loan. But that can change.
That makes an advertisement an opportunity for a lender to brand itself. I was on a conference call recently and two lenders were exploring working together in some form, and one of the lenders said that they really weren’t interested because they had most dealers signed up already. If that’s the case, then the lender can use advertisements to complement the groundwork that is being laid at the dealer by the lender’s sales rep.
Before the economy went into recession, mortgage lenders advertised everywhere. Ameriquest even put its name on a Major League baseball stadium. But many mortgages were originated via brokers. We can argue whether the lenders were right to advertise, but they went beyond the wholesale/indirect channel to find customers. I think auto lenders should be looking to make that same investment.
Ameriquest may not be the best example to use. If ever there was a poster child for predatory mortgage abuse, it was Ameriquest. Hard to find someone worse. That stadium name was taken down.
Advertising is either Image or Product. You are lobbying for product -auto loans. Have the banks eased their credit standards back to a more normal level? That is why I asked if you had data on approval percentages. Anything less than 50% approvals, in my opinion, would not support an ad campaign because every decline letter is a prospective depositor that you just aggravated.
An integrated marketing campaign which includes dealer incentives and targeted buyers carrying pre-approved certificates (not pre-qualified trickery for prospects that will be switched into higher rate loans) and advertising might work.