Faced with increasing downward pressure on growth and profitability amid high vehicle prices, loan delinquencies and a car-buying slowdown, auto finance firms that prioritize strategic customer communications could tip the balance in keeping accounts current and securing repeat financing business. In particular, digital billing and other electronic customer experiences for managing auto loans and leases can deliver a major edge.
“When analyzing the data, we observe that affordability is becoming less of a macroeconomic issue and more of an automotive industry issue. Automakers are opting to manufacture higher-priced vehicles, so further declines in interest rates will not significantly reduce payments.”
Affordability issues persist
Many of the auto industry conditions that favored auto finance firms early in this decade have shifted into reverse. At next week’s 2024 Auto Finance Summit, lenders and servicers will be delineating and discussing a host of challenges that directly impact financing demand, cash flow, revenues and operating costs including:
- New-vehicle retail purchases will be flat at 12.7 million this year, estimates Cox Automotive.
- 73% of consumers have delayed purchasing a new vehicle because of elevated prices, a recent Edmunds survey found.
- Auto loan delinquency rates rose in July for the 34th month in a row, to 3.7%, the highest level since 2009, according to Moody’s Analytics.
- The average used car loan rate, at 18.86%, reached at a 15-year high in the first half of 2024, according to Experian.
- The sub-prime rate on a new car in the second quarter was 13.18%, Experian reported.
Digital engagement is key
It’s hard to exaggerate the benefits of digital communications and payments for driving up customer engagement and loyalty while driving down lender costs. Digital customers are significantly more satisfied overall and cost less to serve than borrowers that use traditional channels to manage their accounts, according to the J.D. Power 2023 U.S. Consumer Financing Satisfaction StudySM.
Digital engagement is much more likely to transform customers into brand advocates, the study found, and thus positively impacting the bottom-line. Compared to brand detractors, brand promoters are:
- 37% more likely to view billing statements via their lender’s app
- 38% more likely to pay their bill digitally
- 59% more likely to receive digital account alerts
- 48% more likely to contact customer care via the lender’s app.
Visit us at AFS 2024 booth #234 to learn about our tech-driven communications and payments solutions. Click here to schedule a meeting at the show.
CX drives payments–and loyalty
Auto finance is lagging when it comes to providing the kinds of digital billing and other customer communications experiences that borrowers want. What’s needed is a strategic approach that meets consumer expectations for:
- Omnichannel choice—Catering to each customer’s preferences for any combination of mail, email, and text messaging.
- Convenience—The fewer steps, the better. Providing self-service is important, but so is reaching a live agent.
- Ease of use—Seamless interactions across the customer journey, plus clear statement design and content so consumers can quickly find and understand the information they need and take action.
- Personalization—In addition to preferred delivery channels, customers want personalized statements and messaging indicating the lender understands the borrower’s specific needs.
Read our white paper: Drive More Effective Auto Finance Communications and Payments
Pulling the key elements together
The right technology lets lenders and servicers meet consumer preferences to generate better financial results and customer relationships. The heart of any strategic communications program is a cloud-based omnichannel customer communications management (CCM) solution. It gives billers the control and agility to create, update, track and report on all their mail, email and text communications on one platform.
With these omnichannel capabilities in place, auto finance companies can go beyond basic billing to add relationship-building content and communications, such as sharing helpful information including car maintenance tips and personalizing refinancing offers as interest rates drop. With more engaging and effective customer communications experiences, auto lenders and servicers can prompt payment, build brand advocates and drive repeat business to boost growth and profitability even in a weak market.
