Could your credit union benefit from an auto loan recapture program?
As the Great Recession fades further into the distant memory of consumers’ minds and the economy has turned itself around, the auto industry continues to see a dramatic spike in sales, and along with it, an increase in auto loan activity. According to Edmunds.com, the US auto industry is projected to sell 16.4 million new vehicles in 2014, taking us back to levels not seen since 2006.
Auto lending is a vital piece of your business, and you simply can’t afford to lose those valuable auto loans to competitors. If you’ve found that you are losing auto loans to banks, captive finance companies, or other financial institutions, an auto loan recapture program may be the answer to your problem. Auto loan recapture initiatives are effective because they are targeted and specialized programs that focus specifically on your members’ auto loans, which were financed through a competitor. Rather than only promoting your auto loan rates in newsletters, on lobby posters, or in statement stuffers, a recapture program focuses on sending proactive, direct mail pieces and/or performs outbound calling campaigns directly to these members with a compelling refinance offer.
Each of your members can cost you thousands of dollars annually through account servicing expenses, statement printing, and postage expenses, among other things, so capturing more of their business—such as their auto loans—is one way to turn a cost center into a profit center, ultimately improving your ROI.
The first and most important step in implementing a successful auto loan recapture program is to determine the specific group of members you wish to target. Whether you acquire the list from your existing member base, or purchase a list of potential members from a third party, it’s vital that you screen that list against well-defined criteria. The more defined and specific your list, the greater your chances are of having a high response rate and, in turn, a greater ROI.
The next step in a successful recapture program is to give your prospects a compelling offer. Your members probably receive dozens of pieces of mail a week. Their lives are busy and getting their attention is not easy. Your compelling offer may range from a simple lower interest rate, to payment deferment, or even pre-screened, pre-approved loan offers. Whatever you decide to offer, the language must be clear and communicate the value, benefits, and convenience your program has to offer.
Once your direct mail pieces and/or phone calls have successfully reached your targeted list of prospects, and the inquiries begin, your next step is to be prepared with proper staff to field the inbound calls, make outbound calls, take and submit loan applications, and follow-up with applicants to ensure all documentation is received and each loan is funded. If this is not something that your financial institution has the resources to support, you may consider outsourcing these tasks.
Working with a dedicated outsourced lender to implement a recapture program allows your institution to leverage that organization’s expertise, infrastructure, and resources to effectively build your loan portfolio without having to utilize your internal resources. Some of the services that an outsourced lender can provide are:
- Call center operations
- Outbound calling campaigns
- Application processing
- Automated loan decisions
- Cross-selling of complimentary and point of sale products
- Campaign follow-up
- Loan closing & funding
The numbers don’t lie. The auto lending industry is growing and your institution does not have to miss the boat and lose valuable member loans to the competition. With an auto loan recapture program, you can grow your auto loan portfolio, improve profitability and deepen relationships with your existing members.
If you would like to learn how SWBC can help you implement a world-class loan recapture program, click here.