LAS VEGAS-Consumer misconceptions regarding auto financing are costing credit unions opportunities to book loans.
That was one conclusion of many in new research conducted by Goldman Consulting & Strategy, Del Aire, Calif., which also examined consumer beliefs, triggers of vehicle purchases, "influencers" of buying and/or financing decisions, how preapprovals can offset the power of dealer, and the role of technology.
According to Neil Goldman, senior partner at Goldman Consulting & Strategy, consumer misconceptions that are causing credit unions to miss out on auto lending opportunities include:
* Consumers believe car dealers will always find them the best loan rate and payment
* Consumers believe seeking multiple preapprovals or loan offers will destroy their credit rating.
* Consumers believe auto loan refinancing costs a lot (and some consumers do not even know can be refinanced).
* Consumers have awareness that credit unions may have better rates, but believe they have to have perfect credit, or have to be "in the club" to qualify for membership.
"Borrowing for the car is just the last part of buying the car, but the problem is consumers do not realize getting financing is part of the same event," Goldman told the Credit Union Direct Lending conference here. "Credit unions need to be proactive and reach out to consumers because their beliefs are skewed. There is emotion connected to buying the car, but not so much related to financing."
Credit unions need to create "distinction" to grow their auto loan portfolios, Goldman continued, noting CUs are different, and in a positive way, from banks, but they have to get that message out to the public.
Three Triggers
The research found there are three triggers for vehicle purchases:
* Vehicle issues-age, maintenance, accident.
* Life change-new job, long commute, new baby, marriage or divorce.
* Opportunity/whim-new car model came out, had a dream car and found it.
Credit unions must be ready to deal with these triggers, Goldman advised. He said his firm's research found for people who had had their car for seven or eight years, the No. 1 trigger is, not surprisingly, that the car is old.
"Maybe it had not even broken down, but there was that fear," he said.
To make the most of such opportunities, he urged CUs to comb through their own data to identify members with cars seven years old or older and let them know the credit union is ready for them when needed.
The Role of Influencers
Influencers can include auto dealers, mechanics, parents and friends. A hidden influence is that many people like to buy the same make of vehicle again, sometimes even the same model, Goldman noted, before observing that the CU cannot be an influence if it is unknown. "If people do not know the credit union exists, it does not matter how good the offer credit unions have available," he said. "Build personal relationships with members to get organic growth."
