By John Flynn, CEO, Open Lending
According to a recent report from the NY Federal Reserve, delinquencies on auto loans are on the rise. In the second quarter, 90+ day delinquencies topped 4%, the highest since 2009 (just after GM and Chrysler filed for bankruptcy).
Also, CNBC recently reported that consumer confidence is falling. That doesn’t mean the market is collapsing. Loan sizes are increasing, so there is greater risk, but as a credit union, how do you find the right product to market to your customers?
As with any market, the right approach is to work with your borrowers to find the right products that solve their challenges. Mine your members’ data. Look at their spending versus their income and a variety of other data sources. Use that data to find the right product to help consumers improve their overall situation.
With many consumers recently purchasing expensive SUVs or in the market for them, auto loan debt is significantly higher than in the past. By leveraging the data you have on a borrower, you can offer refinance solutions to help lighten the load as many customers show concern over the long-term economy.
Combining our data with yours. Create refinance solutions for your members and potential members who are financing automobiles with other lenders. You can likely beat their rates, and help your member lower their monthly payment. Be their trusted adviser and hero!
Mining your data for members who haven’t purchased cars in the last five or so years. Target them with your marketing efforts showing how you can save them money while being more efficient with your marketing. Our partner, Ser Tech, is great for this!
Offering new loan models to better serve your members. In some cases, extending loan terms may be an option when used judiciously. Look to help your borrowers balance monthly payments while saving money and growing their deposit accounts.
Seeking out borrowers that are paying off student loans. These typically younger borrowers are your future membership base. Help them lower costs by refinancing student loans and take the opportunity to show them options for their auto and other loans. Particularly as we head toward an economic slowdown, focusing on helping members through strategic cross selling is less expensive and highly profitable.
There are headwinds in the market, but it certainly isn’t falling apart. According to the Bureau of Labor Statistics, the US’s low unemployment rate is holding; this wasn’t the case in the last financial slowdown. In a market with high delinquency and a need to serve those of modest means and less-than-perfect credit, leveraging data can help your credit union solve the challenges your members are facing and create financial growth for both you and your borrowers!
Say ‘yes’ to more auto loans!