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For many lenders, the coronavirus and subsequent economic challenges have ushered in considerably declining levels of direct auto loan originations and loan growth across the auto lending landscape.
Starting in March of this year, vehicle sales dropped off of the proverbial cliff, reaching their worst levels since March 2010, in the middle of the Great Recession. In 2020, the annual vehicle sales rate fell from 16.8 million to 11.8 million. For some perspective, in March of 2010, the seasonally adjusted annual rate of sales dropped all the way to 11.7 million, which was the worst dip in 10 years—we just surpassed that. The trend continued through the summer months.
Finally, in Q4 of 2020, there is some favorable news on the horizon. According to Globe News Wire, “The automotive industry continues to perform better than initially expected with retail sales down just six percent compared with last year. We’re also seeing one of the best seasonally adjusted annualized rates (SAARs) since March and used vehicles forecast to be up year-over-year for the fourth consecutive month. From a quarterly perspective, new vehicle retail sales are up 27% and used vehicle sales are up 26% quarter over quarter.
Despite this good news, there’s no doubt that the past several months of unprecedented disruptions have left many financial institutions struggling to pivot their direct loan growth strategies. In this blog post, we’ll discuss some actionable steps you can take to set your institution up to survive 2020 and thrive in the year to come.
Aggressive and Proactive Growth Strategies for 2020 and Beyond
This is a time when aggressive and proactive should be keywords in your growth strategy. And, the following should be commonplace at your institution in order to meet your goals:
Frequent loan recapture campaigns
Quick turnaround on loan decisions
Funding and post origination marketing
Compelling product offerings and differentiators
It also may be time for you to look for outside partners to assist you with managing these campaigns and administration if the current staffing model is preventing you from pursuing strategy beyond the day-to-day running of the business.
Despite the COVID-19-related disruptions we’ve seen this year, it is still possible for the small and mid-sized financial institution market to survive and thrive in today’s world. Most financial institutions have already experienced quite a lot of change this year, and contemplating even more change can be daunting. But, the phone is not going to start ringing off the hook if you don’t take action. In the following section, we’ll discuss how offering compelling products during an economic downturn could help set your institution up for success in the current auto lending landscape.
Compelling Product Offerings During An Economic Downturn
At a time when consumers are not feeling very confident about going out and making a big purchase in an uncertain economy, lenders could benefit by shifting their focus from a “low rates and great service” mentality to messaging and product offerings that center around offering peace of mind to the anxious consumer.
To this end, SWBC recently launched the MPOWER+ Vehicle Return Protection Program. This automotive debt-protection product cancels up to $7,500 of negative equity associated with a vehicle purchase, giving borrowers the freedom to walk away from negative equity should a qualifying life event occur such as involuntary unemployment occur. This program gives financial institutions an effective response to declining consumer confidence by:
Giving borrowers the motivation and confidence to purchase their next vehicle, impacting auto loan volume immediately
Increasing consumer satisfaction, driving repeat business
Preserving their borrowers’ credit for future purchases
Products that address the needs of the anxious consumer in the age of coronavirus uncertainty will help reassure your borrowers and increase their confidence in taking out an auto loan. Offering products that are truly helpful gives financial institutions an invaluable market intangible—borrower peace of mind knowing their lender has their back. Providing program options that offer this level of extremely relevant protection and support regarding consumer finances can directly impact your borrowers’ daily lives, and further cement their relationship with your financial institution. This sets your institution up to capture more auto loans now and increase market share more quickly once the economy starts to revive.
Michael Moore joined SWBC in 2013 as a Vice President of Business Development and was promoted to Senior Vice President of Sales in 2016. Mike has 20 years of experience in consumer lending and the financial institutions marketplace. Mike is responsible for overseeing a team of Account Vice Presidents and Account Managers, who serve our client partners throughout the Western United States, Alaska, and Hawaii. He holds a Bachelor of Science Degree in Economics from Santa Clara University and an MBA from Pepperdine University.