Credit unions ramping up their abilities to serve their customers digitally is playing an ever-increasing role in satisfying auto-lead and auto-loan origination for their dealership partners.
It’s no secret that the pandemic has dramatically altered business behavior. Automobile dealers, and the credit unions that serve their indirect lending needs, are no exception. The lockdown and social distance behavioral changes that the virus ushered into society have proven transformative. “After years of being part of a future that never quite arrived, the coronavirus pandemic has put U.S. online car sellers on the map,” noted Reuters News Service. That’s a dazzling silver lining in the dark cloud COVID-19 handed the industry.
The goal, as always, is to make it easier for dealers to satisfy their customers — and for their customers to feel safe, valued, and appreciated by those dealers who earn their business.
Traveling the Digital Path
Dealers have become far more aware of how digital tools can both soothe buyers’ COVID-related fears and make the buying process faster and better overall, resulting in a rapid increase in their adoption of digital path-to-purchase experiences. From the selling and finance process, to how dealerships recondition cars for resale, to how they service customers after the sale, dealers have quickly adapted to serve customers faster, and remotely:
Time-saving service drive customer check-in and check-out tools
Increased use of digital online auction and private-party car buying activity
Online credit application and payment tools
Seamless indirect lending between credit unions and auto dealerships to service a broader market
Increased use of digital F&I products/technology to improve overall vehicle purchase experience
Digital reconditioning tools designed to help dealers get cars bought at auction or at trade-in ready to be resold in hours, not days
Remote vehicle services, delivering a complete hands-off repair and maintenance experience for customers
Embracing Remotely
According to a recent NADA and Roadster survey of dealers, 76% of dealers surveyed said they were able to engage customers online as a benefit of COVID. Further, the survey noted that 61% of the dealers surveyed said digital retail technologies they use improved their sales efficiency, and that 24% reported selling more cars per salesperson.
These are impressive and commanding online retail figures; dealers and certainly their lenders have taken note too. For instance, America’s credit unions, which provide an invaluable and advantageous auto lending alternative to banks and finance companies, are increasingly leveraging digital tools to engage their members.
These tools help members and non-members alike more easily shop for vehicles at local dealerships who also offer digital finance advantages provided by their local credit unions. A look at recent data shows how credit union digital tools are driving online sales. CU Direct’s digital car-shopping site had a 40% jump in lead generation activity to dealers between year-end 2019 and year-end 2020, while loan application clicks increased more than 10%.
Serving an Ever-Increasing Segment of Consumers
Much of this growth is due to shoppers seeking used and certified pre-owned vehicles. Used vehicle lending continues to be a credit union sweet spot, as rates and loan ratios tend to be more attractive to these consumers than do bank and finance rates and terms. In other words, obtaining an auto loan through a credit union is typically a more-advantageous loan for used car buyers.
Used car sales have been a driving force since late spring 2020, resulting in an increase in used car loan originations. The local, community-minded auto dealer is a mutually beneficial match for credit unions and their high-expectation, high-potential members. Discussing these consumers, a survey by Credit Union National Association (CUNA) noted:
• 40% have college degrees, compared with 24% of nonmembers
• 54% of members are employed full time, while only 39% of nonmembers have full-time jobs
• 76% of members are homeowners, compared with 52% of nonmembers
The used vehicle market will continue to offer opportunities for consumers, noted Kirsten Von Busch, a senior manager with Experian Automotive’s AutoCheck product, in a Commentary for Auto Remarketing magazine this past November:
“Let’s remember, for all the fanfare that new vehicle sales receive, used vehicles are overwhelmingly the option most consumers choose. According to Experian’s Q2 2020 Market Trends Review, there were more than 18 million used-vehicle registrations through the second quarter.”
By comparison, there were only 6.4 million new-vehicle registrations during the same period, she said, 24% lower than a year ago.
As the data indicates, credit union digital consumer engagement tools are increasingly important to auto retailers to grow their business. Credit unions remain vital lending sources for America’s auto dealerships.
The third-quarter 2020 Experian Finance Market Report sheds additional light on these opportunities. As Experian noted — and which auto dealers know well — used cars drew considerable consumer attention in 2020. Consumers choosing used cars grew from 71.47% of all consumers through third quarter in 2019 to 73.14% in 2020.
New-car supply diminished by factory and transport COVID-related challenges tightened on-the-ground inventory at dealers in 2020, while vehicle affordability contained to push many consumers out of the new-car market. In turn, consumers sought certified-preowned vehicle alternatives and older model year vehicles. CNBC noted another factor driving used car demand were consumers seeking to avoid public modes of transportation by seeking out affordable used vehicle options
Credit unions remained strong competitors for auto loans in the third quarter with 29.08% of the market to banks’ 37.83%.
Faster, Friendlier, and Human-Centric
Largely due to the impact of COVID-19 on dealership operations, dealers are leaning out and embracing efficiency in operations more than ever. They have learned to be more efficient with less personnel and are spending less on advertising and holding costs, noted Automotive News.
Sales volumes driven by digital interaction, whether end-to-end or some part of the cycle, show resilience and increased popularity. Digital retailing tools like credit-union-centric dealership shopping sites, as well as digital indirect lending technologies, are increasingly bringing car buyers and auto dealers together by improving both the dealer and buyer experience, keeping matters of health and safety foremost in mind.
The goal, as always, is to make it easier for dealers to satisfy their customers — and for their customers to feel safe, valued, and appreciated by those dealers who earn their business. Credit unions ramping up their abilities to serve their customers digitally is playing an ever-increasing role in satisfying auto-lead and auto-loan origination for their dealership partners.
Bob Child is COO at CU Direct.
