Start the Year with an Auto Refinance Bang!
Today, used cars can cost as much as brand new cars! Even with dealers willing to discount their new car 2021 inventory, prices are still at an all-time high. Much of the blame lies with the global shortage of microchips. A typical car has two to three dozen microchips for everything from stability control, fuel management, safety systems, and driver assistance.
Due to work-from-home conditions resulting from COVID, consumers increased their electronic device purchases, including televisions, smartphones, and tablets. The increase in electronic device purchases, plus strong auto purchases in 2020, created the chip shortage scenario. The result is that microchip manufacturers could not keep up with the surging demand impacting production at all auto manufacturing plants, forcing delays and shutdowns.
Due to reduced new car availability, consumers turned to used car purchases, which often come with higher loan interest rates. Outside of special dealer financing on new cars, average new car loan rates are an average of 4.1%. By comparison, used car rates have an average interest rate of 7.4%. This is an excellent opportunity to promote auto refinances, recapture loans from competitors and increase auto loans within your lending portfolio.
Even without the microchip shortage, three scenarios make this a prime time for consumers to consider a refinance:
  1. Consumers are holding onto their cars longer. That means auto loans made before COVID may have a high-interest rate.
  2. As inflation drives up costs of goods for consumers, many will be looking for ways to reduce expenses.
  3. As mentioned earlier, since consumers have been forced to purchase used cars based on limited availability of new cars, any monthly car payment savings by reducing the rate on a used auto loan will mean more cash for other expenses.
Now is the perfect opportunity to partner with a provider that makes the refinance experience easy for you and your members. Our WithClutch partnership enables your credit union to efficiently acquire auto loans from other lenders. The WithClutch solution offers a clean front-end presentation to make your members aware of the money they could save by refinancing their auto loan with you. Personalized marketing campaigns are easy to set up and deploy so that you can present targeted offers through the online, mobile, email, and text marketing channels. WithClutch also integrates with most loan origination systems such as LoansPQ, CU Direct, and Defi Solutions, enabling your credit union to retain the autonomy of the loan process.
The nation’s leading microchip manufacturer, Intel, has announced it will not be able to catch up with its current microchip orders until well into 2023. As a byproduct of this microchip supply challenge, Toyota cut production by 15% in November 2021, with further expected cuts in 2022. This means the prime auto refinancing opportunity for credit unions may expand beyond 2023.
Putting an auto loan recapture program within your credit union’s digital experience increases your ability to capitalize on auto refinance opportunities, increase member satisfaction, increase auto loans in your portfolio, and increase products per household. It is a win for your member and a win for your credit union.