The coronavirus crisis has led to another crisis — major auto supply chain disruptions around the world. Shuttered workplaces and tightened exports, along with a shortage of semiconductors and other parts, led several auto manufacturers to reduce production. In fact, a recent survey conducted by the Economist Intelligence Unit found that 51.7% of automotive professionals felt that disruptions to supply chains were “very significant.”
But what does this shortage mean for auto lenders? With fewer cars available for sale, prices are climbing and there are fewer willing buyers. And that means every potential loan origination is more valuable than ever.
I will share my best practices for thriving despite these challenging conditions, based on my recent experiences working with auto finance leaders.
1. Digitizing Stip Collection
A recent survey found that a whopping 82 percent of borrowers think it’s important to be able to complete an auto loan process entirely online and remotely. And 85 percent said they would be more likely to purchase a vehicle in the next few months if they could complete the process digitally. For auto lenders contending with supply bottlenecks and the concomitant reduction in sales, ears should be perking up.
The stip collection process is usually rife with paper documents that must be presented at a physical location. Customers who may already be on the fence about purchasing a new vehicle may be dissuaded from it due to the time commitment involved. Worse, they may go to another lender who promises a seamless online process. Enabling borrowers to digitally submit stips makes it easier for fence-sitters to say “yes” to buying a car — and taking out a loan from you, not your competitor.
And here’s another reason why digital stip collection makes it easier on customers: different borrowers may be required to submit different documents. Digital stip collection eliminates the ambiguity involved, as conditional logic can be used to tailor the stip request process to the individual borrower.
Digitizing stip collection offers an additional benefit: strengthening the partnership with your dealers, as your dealers’ partners are working with your competitors. Making their job easier by efficiently and digitally collecting stips directly from the customer during the funding process will differentiate you from their other lending partners. The faster you fund the loan, the faster you pay the dealer. As a result, the dealer is incentivized to assign the next loans to you rather than to your competitors.
2. Simplifying Forms
Another stumbling block for fence-sitting car buyers is all those pesky financial forms they are forced to fill out. The mere prospect of filling out information, and scanning and emailing the forms (or bringing them to a physical location) is enough to make some consumers postpone purchasing a car. Furthermore, it’s not always clear which form fields are relevant and which can be skipped.
Digital forms simplify the form-filling process for borrowers. Loan officers can automatically generate dynamic forms that change based on how borrowers answer questions. For example, certain fields can be preconfigured to appear only when a borrower checks a box or selects a pertinent option from a dropdown button. These responsive digital forms entice customers to start and finish the application process.
Finally, these digital forms should contain space for borrowers’ eSignatures, which they can add with a simple scribble on their smartphone screen.
3. Showing your Humanity
Harnessing the power of digitization is an easy way to lower the intimidation factor of securing an auto loan. But during these times, when car prices are higher and availability is lower, it’s crucial not to overlook the importance of the human touch. Auto lenders should be aware that the customers they serve may be compromising on the car make or price they had anticipated due to supply chain issues.
Auto lenders that demonstrate empathy towards their customers will be rewarded. Whether it means offering a lower interest rate in exchange for the borrower signing up for ACH, or allowing a flexible repayment schedule, lenders can set themselves apart from the pack by being there for borrowers and, just as important, for dealers.
Ride the Wave of Supply Chain Disruption
Many of today’s customers are waiting until their preferred car models and prices are back to normal. That’s why auto lenders need to make the loan application process as painless as possible for those consumers who do go outside their comfort zone. Through a combination of intuitive, remote-friendly digital loans and a flexible approach, auto lenders can ensure no prospective borrower is lost due to burdensome paperwork. The borrowers are here — they just aren’t as plentiful as they once were. And that’s all the more reason to make their borrowing experience a seamless one.