The financial services industry is continuously evolving, and it is essential to optimize collections strategies to maintain liquidity and minimize risk. One of the most critical choices for credit un...
Does your institution take advantage of tax season to increase auto loan promotions? If not, perhaps that is something you should consider, and for good reason. As of March 6, according to the IRS, the average tax refund is $3,034, a 3% increase from the same time last year. In addition, car sales tend to rise during tax season. According to Edmunds, car sales peaked around May for most manufacturers. If your customers are planning to get behind the wheel of a new vehicle this year and have an influx of extra cash, they will likely turn to you to meet their auto lending needs.
Executing a targeted auto lending campaign during tax season is a smart move that could potentially increase your auto loan portfolio, but why stop there? Interest income is usually a primary goal for many of our financial institution clients, but ancillary fee income—not to mention the opportunity to increase customer loyalty—can and should be a close second. Cross-selling to your current customers can give your sales team an advantage—those customers have already placed their trust in your institution, making them an obvious market for cross-selling point-of-sale or insurance products and services. Here are three reasons why cross-selling can maximize your auto lending strategy and, potentially, be key in the future of your financial institution's growth and success:
1. Increase Customer Loyalty
The competition in the financial service provider arena is fierce. There are a number of auto lenders—large banks and institutions, pay day lenders, community banks, and even insurance companies—all competing for the same pool of borrowers. Offering a low rate is no longer enough to keep current borrowers and attract new business. More often, consumers are looking for added value from their financial institutions. Fulfill that need by offering your borrowers low rates and the option to add products that can protect and insure their vehicles, save them repair costs in the event of a mechanical breakdown, make payments on their loans if they become disabled or lose their job, and much more. Do all of your borrowers know that there could be a balance on their auto loan after an insurance payout if they are in an auto accident and total their vehicle?
If a car accident occurs, the last thing your borrower wants to hear is that they still owe a significant amount of money on a vehicle that they can no longer drive. Wouldn't you rather be able to deliver good news—informing them that because they decided to purchase an auto loan protection product, like GAP with PowerBuy™, from you when they closed on their loan, they have their balance paid in full, and also have money for a down payment on a new vehicle? You would be the hero. This is exactly the kind customer interaction that can lead to increased customer loyalty.
2. Increase Fee Income
As mentioned earlier, many of our financial institution clients prioritize generating interest income. However, if you can provide your borrowers with vehicle protection product options and earn fee income as a byproduct, it's a win-win for everyone. Cross-selling a complimentary insurance or vehicle protection product at the close of every auto loan can increase your institution's fee income and perhaps help keep rates lower for your borrowers, giving you a more competitive auto loan program.
While not all of your borrowers will decide to purchase a vehicle protection or insurance product, some will, and the more well-versed and confident your staff becomes at communicating the advantages of purchasing from you—their trusted financial services provider—the more your conversion rate will increase, resulting in even more fee income, in addition to the anticipated auto interest income.
3. Improve Service
Improving customer service works in tandem with increasing customer loyalty. Depending on the culture of your financial institution, "selling" or "pushing" products may not seem like a way to improve service, but maybe it's time for a new school of thought. Consider your role as a financial educator: how many of your customers would lose their job if their vehicle was totaled and they couldn't afford to get a new one to get back and forth from work? How many of your customers are paying hundreds of dollars more for auto insurance because they didn't have the option to work with an agent that could shop carriers on their behalf? How many of your borrowers could lose their vehicle and have their credit score ruined if they lost their job or became disabled and could no longer make their vehicle payment?
Providing your customers with the option to invest in products that could potentially save them from a financial disaster is the epitome of great service.
Standing out from the crowd of lenders may not be easy, but it is doable. Offering your borrowers valuable protection products and going above and beyond at the close of every loan can take your auto lending strategy to the next level and create lasting customer loyalty.
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