Cost-Conscious Consumers Are Moving to Digital Auto Refinancing
The economic challenges of the past two years have caused consumers to become more cost-conscious, searching for ways to save money. The ability to pay bills and manage cash flow effectively are among their top financial concerns.
According to CUNA Mutual Group, these worries contributed to consumers’ shifting approach to their auto-buying experience.
Consumers in Charge
While the initial appeal of emerging digital experiences was speed and convenience, financially-impacted consumers discovered a new benefit — control. Auto shoppers can now apply for financing, quickly compare vehicle options, and select add-on products in minutes without the stress, frustration, and slow pace that often comes with a dealer experience.
Along with this new ability to control the process that had traditionally been managed by the salesman, the digital buying journey allows the consumer to remain anonymous. They feel empowered to make a decision that’s right for them without the social pressure of working with a salesperson.
Similar to digital car-buying experiences, the availability of refinancing information has become more transparent and reliable, offering the ability to shop digitally for options, link to educational resources, and quickly reach customer support. As consumers continue seeking ways to save and manage their money, many more are turning to vehicle refinancing and investigating digital options. In 2020, 16% more Americans applied for a vehicle refinancing than in 2019. This trend is significant for credit unions, which captured 69% of all refinances in Q1 of 2020.
Credit Union Auto Refinancing Strategies
Credit unions have typically gained market share when banks and other lenders have tightened their underwriting policies, considering a broader range of credit scores for auto refinancing. They have also focused on consumers looking for used vehicles and have been able to offer better pricing with lower rates than the competition.
To address this growth segment, credit unions may want to consider:
- Marketing to auto buyers within the first two years of their original purchase
- Focus refinancing messaging on payment savings versus APR reduction
- Provide members with more control within the digital application:
- Instead of simply declining an application, offer alternatives the member can consider.
- Automate conversations, allowing the member to ask a question without having to leave the application or wait for someone to help them.
- Pref-fill data to eliminate an often-tedious task.
A consumer’s approach to borrowing money is not based primarily on convenience — emotion plays an increasingly significant role, especially as effects of the pandemic continue. The digital process provides control, reduces stress, and makes them feel better about their decision. Strategies that help reinforce that experience can go a long way to driving a credit union’s lending business.