As Car Shopping Gets More Convenient, Lending Gets More Difficult

By Rich Trace, Vice President of Wholesale Lending and Commercial Protection

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Car buyers today have much more control over the process than ever before. Think about everything a consumer can do before ever stepping onto the lot:

  • Visit dealer websites to explore their inventory.
  • Review specific vehicle information beyond the window sticker.
  • Compare vehicles and prices from multiple dealers.
  • Get a detailed vehicle history from any number of online sources.
  • Research ratings and reviews for virtually any make/model.

All of this activity can be done from the comfort of home using a computer, tablet or smartphone. This convenience has significantly impacted how dealers operate, and has put buyers more comfortably in the driver's seat. If dealers don't make it easy for customers to access information as they shop, they'll find it elsewhere. The risk is losing a potential sale without the buyer ever walking into the showroom or even having a conversation.

The same principle applies to financing. Borrowers want to easily access the information they need to make a decision - from researching rates and terms, through the application process, to approval and ultimately the closing. If your lending process isn't convenient, borrowers will simply find a better option, meaning your credit union lost a potential loan with little to no interaction with the borrower.

Want proof? Internal data shows members have applied for more than $6.4 billion in auto loans from 2011 through January 2017, using just CUNA Mutual Group mobile apps. And, more than 41% of all applications CUNA Mutual Group processed in the last quarter of 2016 were submitted via mobile – the highest percentage ever. Another sign comes from Callahan, which reported that "Indirect lending at credit unions continued to pull ahead of direct lending in the last quarter of 2016, account(ing) for approximately 56% of total auto lending" (Opens in a new window) (login required).

This drive toward convenience is also causing car manufacturers to change their approach, which should concern credit unions. In January, Ford announced their investment in the fintech AutoFi (Opens in a new window), stating that the "platform makes it fast and convenient to finance a new Ford or Lincoln at a time when many U.S. adults say they want to spend less time at dealerships, while still going to their dealer to 'sign and drive.'"

GM is going a step further with their new Book by Cadillac service. For a monthly fee, consumers can keep a car or trade it at any time for a different model. There's no long term contract - it's a monthly arrangement. As CNN Money (Opens in a new window) put it, "It's a new way to own a car. Or rather, to not own a car."

As the car buying landscape continues to shift, credit unions need to constantly adapt to remain relevant to their members. As Debi Southworth, Chief Lending Officer, OMNI Community Credit Union said, "Members are looking for online lending. Branch traffic has continued to decrease as people become more comfortable online."

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