By: CRIF Select Corp
The following post is part of a series of blogs written by MeridianLink Partners who will be attending the MeridianLink LIVE! User Forum in May 2022. To learn more about the event, click here.
The automotive industry is in a state unlike anything that we have seen before. Inventory is down, prices are above their traditional levels and people are willing to wait for months to receive delivery of a new vehicle. Seeing that we are in unprecedented times, it can be good to take a step back and evaluate your program, even the basic pieces of it.
With no inventory and only so many deals to go around, separating yourself from your competition is as important as ever. Especially when it comes to business competition in general, blending in does you no good. If there’s nothing to separate you from other banks and credit unions, then you’re as good as invisible.
Potential customers notice what’s different. They do business with the ones they perceive as offering the most value. Finding this hidden value is sometimes referred to as finding your niche.
In the indirect lending space, niches are all about bringing something to the table that dealers perceive as a need they aren’t getting from anyone else. Standing out with your terms and rates as well as offering actual value and service that dealers aren’t getting from your competitors – that’s the kind of niche banks and credit unions need to find to drive their indirect lending portfolios and spur growth.
Most lending institutions have their ears to the ground in terms of offering similar rates. Finding a niche is significantly more complex than simply undercutting the lowest rate available. It starts with researching your competition and establishing strong lines of communication with your dealers. Talk to them early and often. Ask them about the specifics of what you need to do to earn their business.
Pleasantries, small talk, donuts and other foot-in-the-door techniques aside, most discussions start with dealers asking you how you can help them and their business…basically, what’s in it for them? For example, they may ask you if you’d consider subprime paper or ask for approvals for applicants with no credit score. This is a common need of dealerships, especially those that see full spectrum levels of credit. But if you aren’t that big of a risk taker, where do you go from there? This is where well thought out talking points and creativity can help you discover what’s holding them back from making more deals with you. Be honest, be knowledgeable about their business and about lending, and above all be a good listener.
Niches should be unique to you and fit into your lending strategy. An example of one of the more popular niches being offered is term extensions. If dealers usually deal with terms such as 72 months at 2.99 percent, an extension gives them the ability to extend the term without increasing the customer’s monthly payment. This is one of the biggest selling point for car buyers. With the extension, dealers have more room to add on back-end products such as service contracts, warranties, and GAP. Extended terms can have a negative connotation to them, but since most consumers pay off their vehicles before the loan term ends anyway, this is a minimal risk other than the loan balance pays off a little slower than normal so it is an attractive option. However, if everyone is offering this, is it even a niche anymore?
Finding a niche that sets you apart and gets you noticed is essential for establishing a successful indirect lending program. CRIF Select Corp has a proven track record of helping banks, credit unions and other financial institutions of all sizes build strong indirect lending programs and strengthen relationships with their dealers.