By John Flynn, Open Lending President & CEO
In a recent report from US News, auto sales in the month of April were off 45% from the previous year, clearly due to coronavirus. During the same time, many automakers had plant closures, supply chain issues and even announced the delay of new models. These delays, compounded by the crippling effect of stay at home orders in many states during the pandemic, have hurt automakers, lenders, and especially dealers.
During these times, it’s important for financial institutions to work closely with their dealer partners to help them weather these trying times and keep as much of the auto lending pipeline heading your way. If your credit union approaches the situation with empathy, you can make it a win-win for you and your car dealerships.
It’s important at this point to understand the dealership model. While selling vehicles is a primary income stream for them, other attractive areas for them are commissions on loan sales, add-ons (i.e. extended warranties), and service and parts departments. And, yes, collaborating with their own financing arm. Because many consumers are staying home and many are looking to cut back expenses due to the economic fallout of coronavirus, dealerships are taking hits across the board.
Work with them to find out what kind of customers they're getting in their shops to see if you can more appropriately package your deals in addition to reviewing what the loan applications are telling you about borrowers. Are they lower income and have to buy a vehicle or are they young parents with teenage drivers? Ensure your loan products and decisioning criteria help guide them to your loans – winning both of you much needed business. Also look at your deal structure with them. See if you can help them with bonuses or work to help them sell additional products to their customers within the loan – not only increasing loan value but providing much needed revenue for the dealership and benefits to the buyer. Used autos and refis are real opportunities right now. Open Lending can help you say ‘yes’ to more and faster! Learn more here.
Now is also the time to work with them on streamlining your systems and practices. As many dealers are moving toward contactless delivery solutions, ensure your credit union’s systems support this. Solutions such as electronic documents, electronic verification of documents (i.e. driver’s licenses, uploads of prior paychecks, etc.), and electronic approval to speed the process for dealers, lenders and buyers.
Yes, these are trying times, and lenders need to be a bit more cautious about who they are lending money to - especially when you partner with your dealers and not just leverage them as a loan distribution outlet. Invest in the partnership and the symbiosis will help all involved weather these trying times and build long-lasting and successful relationships.