The landscape for auto lending has changed dramatically in recent years. Some large lenders have seen huge growth in auto loans while many smaller banks and credit unions have seen their portfolio flat to shrinking. Let’s take a look at some of the trends and investigate why it has never been more important for lenders to be competing for online searches or “looks” well before the buyer decides to actually get into a new vehicle.
Large Lenders “Not So Secret” Advantage
Capital One recently reported huge gains in auto loans, an increase of 29% over last year. Ally Financial has reported record gains as well. Why are these two lenders seeing such huge gains that many other lenders aren’t experiencing? It’s because they’re investing in technology to provide the consumer with an experience that caters to their shopping habits. Commerce habits are changing with younger generations of adults, Millennials and Gen Z, preferring to make purchases online out of convenience. More importantly, younger generations use their phone and mobile apps far more than they use computers.
Rise of the Online-Only Dealership
The days of only going to a dealership in-person are gone, with most people at least starting their car search online and some even purchasing their car completely online. This has led to online dealerships such as Carvana, Shift, and Vroom, rising in popularity in recent years. In fact, Vroom saw such large gains that they acquired their own lender and it’s only a matter of time before other online dealerships start doing the same thing, taking even more of the market share from traditional lenders.
In addition to online dealerships, platforms such as AutoTrader, CarGurus, and TrueCar have turned the car buying journey into an online marketplace. Consumers browse vehicles and want to get approved before even going to the dealership. Historically, lenders have provided the online applications for auto loans. If lenders are already offering an online application for auto loans, then why invest in technology that does that? Here’s a great test – try filling out an online application from your lender and time how long it takes to get a call. Then, fill out a form on a dealer’s own website and you can expect a call in minutes!
The Importance of Online Pre-Approval
A recent J.D. Power press release “Battle for Auto Loan Customers Shifts from Dealership to Online Pre-Approval” explains the current trends very clearly. “Auto financing customer behavior has fundamentally shifted from an exercise that largely took place in a dealership finance department to one that takes place online upwards of 30 days prior to a vehicle purchase,” said Patrick Roosenberg, director of automotive finance intelligence at J.D. Power. “Nearly half, 45%, of all customers now do research prior to financing a vehicle and their experiences with lenders can have a tremendous influence on that process. That really puts the onus on lenders to deliver a superior customer experience to existing customers and to position their websites and consumer marketing initiatives to maximize conversions.”
The J.D. Powers study also found that 60% of customers who shop online for auto financing options end up applying for a pre-approval.
So, if you need help getting more “looks” that lead to auto loans, contact us today. Our AutoQuoter customized online solutions, mobile apps and kiosks can be just the advantage you need to compete in this quickly evolving marketplace.