Your answer will determine your future in auto lending so let’s understand the difference.
Yes, Zeros and Ones are “computer talk” as computers speak in binary. It’s all zeros and ones, where a zero = off and a one = on and combinations of 0s and 1s is what “digital” is all about.
Auto buying and lending has been trending digital (zeros and ones) for quite some time. COVID has forced us all to use digital resources (to speak binary language) more and more as we’re working from home, shopping online more and using our phones, tablets and computers for just about everything.
Take a look around. Digital is everywhere – especially in car buying and financing.
Here are some facts that help us understand the effect digital has had on auto lending:
- 90% of consumers begin the car buying process researching online
- Consumers spend an average of 12-14 hours online before buying a vehicle
- Spending this time on typical car research sites places “digital cookies” on consumer devices that track and sell consumer search history to credit union competitors
- Credit union members are under constant attack as dealers and internet marketers target them to buy and finance vehicles using data, analytics, marketing and AI
The internet has made us less patient and now consumer expectations are that, with a few mouse clicks, we should be able to do our auto research, find the vehicle we’re interested in, arrange the financing and either have the vehicle delivered to our home or just pick it up at the dealership with minimal human interaction.
Auto dealers and manufacturers are spending billions of dollars on everything “digital”. Here they attract consumers into their online marketplace, provide all the auto research, buying and financing tools and provide an end-to-end digital car buying experience, all from the comfort of the consumer’s home, office, laptop, phone- anywhere the consumer might be. If your credit union is not embracing digital car buying, auto loans in these online marketplaces will gravitate toward manufacturer captive and a small select group of digital financing sources.
Some might even call this digital paradigm shift the “Carvana” effect, as Carvana provides everything from online research and buying to touchless home delivery. As the leader in online car buying, Carvana’s touchless car buying model has produced a 1200% increase in their stock value in the last 12 months. Digital is real and here to stay.
Dealers no longer have to “sell” a car. The customer “buys” it, having done all their research, pricing, comparisons and more online. Before they even contact the dealer, most consumers know enough vehicle and pricing information to close the deal.
“But we’re a financial institution, not a car buying service…”
You might ask yourself where this leaves credit unions? With today’s DIGITAL technology, to compete in the auto vertical, you can, and must, be both a great FI and provide a great digital car buying solution!
So let’s go back to the headline question to see where you stand. Are you a Zero or a One?
If you’re a “zero”, this means you haven’t embraced digital car buying and are focused on making loans. You’re in a defensive position waiting for members to come in, fill out an online loan app or for dealers to send you indirect loans. In this defensive position there is a high likelihood that 1) you won’t be considered for financing by most buyers/members and 2) your best days in auto lending are likely behind you as digital solutions continue to pass you by.
If you’re a “one”, this means that you embrace digital solutions and employ offensive strategies using technology, data, marketing, analytics and AI to complement your defensive positions in the auto vertical. Your digital solution will have all the components desired by consumers under your website and marketing umbrella and will protect members’ search history from 3rd party cookies and associated marketing from competitors.
Your digital car buying solution should have everything from a diverse vehicle inventory selection including pricing and monthly payment options, to used car valuation tools, vehicle history reports, safety ratings, and payment calculators. It should have easy access to loan applications and credit union financing. It should include virtual test drive videos and present payment options such as amortizing and lower lease or balloon payments. As members use your digital car buying solution, they will funnel into your auto lending channel where you can close the loan and protection product sales.
Auto buying technology has advanced significantly in the last year and whether your credit union does direct or indirect auto, has a concierge car buying service or links to other car buying sites, it is imperative that you explore the newest digital options available to compete and win.
There is a high trust factor with credit union members versus dealer and other vehicle search sites and rightfully so. Research tells us that consumers prefer and trust completing their auto research and buying on their member-owned credit union’s website versus dealer and other 3rd party sites. Credit unions are the only ones in the auto vertical with a mission of People Helping People and should market that member-centric philosophy, driving members to their digital car buying solution.