Is Diversification in Your Auto Loan Offerings the Saving Grace for Non-Interest Income Generation?

hands protecting blue car
By Stephen Lang

3 minutes

Add in auto lending education and personalized messaging for a winning combination.

Sponsored by SWBC

Both new and used car prices soared during the pandemic because of chip shortages and growing inflation. The latest data from the U.S. Bureau of Labor Statistics shows used car prices coming back to reality with the hope they’ll return to normal in the latter half of the year.

The combination of vehicle shortages, price increases and inflation has credit unions thinking about new, creative ways to identify opportunities to generate non-interest income. Let’s look at how auto lending education, mining your data to deliver timely messages and diversifying non-interest income should be a part of your overall auto lending strategy.

Auto Lending Education

Establishing a healthy pipeline of potential borrowers is key to growing your auto loan market share. This begins with communication. Communicating with all your account holders—regardless of whether they have an auto loan with your credit union—expands your target audience for financial education messaging. Over the last few years, many credit unions have leaned into the financial wellness education approach to engaging their member base. It’s a good approach and a great opportunity to weave auto loan education into your message mix.

While many people know credit unions offer auto loans, there’s always an opportunity to generate new awareness or keep it top-of-mind that your credit union offers competitive auto loans.

Mine Your Data to Deliver Timely Messages

Your credit union more than likely has a wealth of information your teams can use to help personalize communication with your members. Here are some ways you can leverage data points in your databases to help deliver relevant and timely auto loan messaging to your members.

Identify current borrowers who are six to eight months away from paying off their loans and begin communicating to them about your institution’s rates, auto-buying programs, and/or ancillary products. It’s all about sharing the value your organization brings to the table. Consider key points that will help make a member’s life easier when purchasing a new or used vehicle.

Another approach is examining when your borrowers typically trade in their vehicles. You could even break this out between new and used auto loan borrowers. This analysis will give you greater insight into when your borrowers, on average, trade up for a new or used vehicle. Your team can then turn this insight into actionable information by communicating messages about your auto loan program at the ideal timeframe when your member will be getting the itch for a new vehicle. By doing so, you’re creating an opportunity to build loyalty with that member and recapture the loan at the same time.

Diversifying Non-Interest Income

Offering borrowers your point-of-sale products at the time of loan origination is the traditional approach to ancillary services. Major mechanical protection, vehicle service protection and guaranteed asset protection products continue to be presented in the same manner they’ve always been.

While some MMP offerings can include a digital component for post-loan origination conversion, most credit unions rely on having loan staff cross-trained in sales to deliver the ancillary service pitch.

What can institutions do to diversify how they deliver non-interest income services? Consider new income-generation tools to provide a fresh approach your members can relate to, are low maintenance and can be presented at any point in the loan lifecycle. For example, some credit unions have discovered SWBC’s healthCAR Vehicle Protection program, an affordable, pay-by-month vehicle service protection plan with digital enrollment and claims filing. Credit unions find it a win-win because it’s available to members with vehicles up to 20 years old and can help vehicles stay on the road longer with its unlimited mileage coverage.

As the economy continues to fluctuate, members look to trusted sources like their credit unions for services that will bring long-term value to their financial wellness. Credit unions will be in the best position to serve when they leverage financial education, personalized messaging and complementary offerings that also generate income for the credit union.

Stephen Lang is Northeast regional VP for CUES Supplier member SWBC, San Antonio, Texas. With a focus around our Total Solution strategy, Lang works to provide financial institutions them consultative advice around risk management, technology and creative ways to generate non-interest income. Before joining SWBC, Lang spent almost 10 years in the insurance industry, including time with large national consulting firms such as Risk Strategies and Arthur J. Gallagher. He holds life & health and property & casualty insurance licenses and the Certified Employee Benefits Specialist designation.

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