The pandemic hit the U.S. hard in 2020, which caused financial difficulties for many households and businesses. The auto industry, like many others, took a big dip with sales falling to the lowest level since the Great Recession. Although the industry rebounded faster than expected, figures are still down compared to 2019.
To stay competitive in this tight auto loan market, credit unions will need to focus on adapting to the “new normal.” But how exactly? Here’s a closer look at how COVID has changed the auto lending landscape and what you can do to ensure your credit union continues to thrive.
How is COVID Impacting Auto Loans?
At the beginning of the pandemic, the annual vehicle sales rate plummeted from 16.8 million to 11.8 million. Stay-at-home orders and rising unemployment both contributed to this huge drop.
Unsurprisingly, auto loans also suffered during this period. In the third quarter of 2020, 10.7% fewer loans and leases were originated compared to Q3 of 2019.
Although vehicle sales are still down from last year, the auto industry is starting to rebound thanks to low interest rates. Further, many city dwellers have been moving to the suburbs in search of more space, resulting in an increased demand for cars.
In the final months of 2020, new vehicle sales were up 27% and used car sales increased 26% quarter over quarter.
TransUnion projects that auto loan originations will rise by 6.8 million in the first quarter of this year, continuing on the path to recovery.
Activating Auto Loan Growth Post-COVID
Consumer behavior has changed significantly because of the pandemic, creating a growing need for credit unions to adapt.
For example, Americans are much more price-conscious and cautious with their money than before. In a recent survey, two-thirds of Americans said they’ve cut back on their spending as a result of the pandemic.
One-third of respondents also said their main financial goal for 2021 is keeping their spending in check so they could grow their savings and pay down debt.
This desire to save money may help explain why used cars have performed better during COVID. Used car sales are only down 5%, whereas new car sales have dropped 19% from where they were last year.
To attract new members in 2021, you’ll need to adapt to these changing consumer priorities.
Here are a few tips to help you pivot.
Highlight Potential Savings
A good way to appeal to financially-savvy consumers is to highlight your affordable rates and fees. Credit unions often offer markable savings over traditional banks. By helping potential members see the difference, you can win their business and attract them to your institution.
Create Educational Content
Investing in educational content about car buying can help people, who are in the market for a vehicle, to find your credit union online. Publishing helpful articles will also build your brand authority while establishing trust with consumers. If you provide them with the information they need to find a reliable used car, they will be more likely to come to you for their auto lending needs.
Focus on Auto Refinancing
Because consumers are taking out fewer purchase loans due to the pandemic, many lenders are pivoting and focusing on auto refinancing. With interest rates at record lows and consumers looking for new ways to save money, now is the perfect time to spotlight your auto refinance options. E-newsletters and digital ad campaigns can help you raise awareness about your offerings and gain new customers, who want to lower their car payments.
Another aspect of consumer behavior that has changed during the pandemic is how people prefer to bank. For safety reasons, many customers have chosen to bank digitally rather than visiting physical branches.
However, 50% of people say that even after the pandemic is over, they don’t plan to return to in-person banking.
This presents a challenge for credit unions that have prioritized customer service at their brick-and-mortar locations over their online lending experience.
By adopting new technologies like cloud-based loan origination software, you can streamline the process and make it easy for consumers to apply for your auto loans from the comfort and safety of their own homes.
Stay Ahead of the Curve
Although auto loan origination is expected to increase in 2021, the industry likely won’t recover to pre-COVID levels until 2022 — at the earliest. To stay competitive in this down market and meet your customer’s needs, you’ll need to adapt.
The coronavirus has driven many consumers to online banking, which may push them toward big banks that have user-friendly mobile apps and completely digital loan processes.
Your credit union can win them back by emphasizing your low rates and fees, rolling out mobile banking solutions, and implementing software like our loan origination platform. It will enable you to better serve your customers by providing faster approvals and an intuitive 100% online application process.
Learn more about Sync1Systems, 1-Lending loan origination software.