In my previous blog post, I discussed how COVID-19 is impacting the auto lending industry. While industry analysts were not expecting 2020 to be a record year, with the widespread outbreak of COVID-19 in March, vehicle sales effectively dropped off a cliff, reaching their worst level, based on a seasonally adjusted rate since March 2010, during the Great Recession. Today, I want to provide some specific strategies your financial institution can deploy in order to supplement auto loan originations and increase loan volume.
Focus on Refinancing
One way to compete in this unprecedentedly competitive landscape is to focus on refinancing. Whether you are looking to capture new borrowers or recapture the loans of existing borrowers, refinance programs are a way to keep your financial institution’s lending portfolio strong. Refinance programs are not a new phenomenon, but now is a good time to evaluate and refocus your efforts on this channel.
The fact is, there are millions of prospective borrowers that are paying too much for their auto loans. According to U.S. News and World Report, consumers with FICO scores from 700 to 749 were paying an average of 4.73% for a new car loan and 4.98% for a used car loan as of August 2020. This indicates there is significant opportunity to audit your auto loan portfolio to conduct a targeted outreach to borrowers who could benefit from refinancing their auto loans. One way to tactically run a refinance campaign is to follow these steps:
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