Customer Experience: Why It’s Important to Indirect Auto Lenders Too

You’re hearing the term “customer experience” everywhere. The concept started in technology with Apple leading the way in how we experience music, phones, and computers and quickly made its way into retail with Amazon changing how we experience our daily shopping. Nowadays we even have user experience and customer experience designers whose role is to design how consumers interact with companies and their products.

But what does user experience have to do with auto lending? Especially indirect auto lending where lenders’ interaction with customers is, well, indirect. The truth is that the vast majority of consumers purchasing vehicles from dealers aren’t choosing who they’re borrowing the money from to make their purchase. A lot of them don’t even know who they’re borrowing the money from when they walk off the lot. Sometimes the dealer’s not even entirely sure which lender is going to fund the loan. So why should an indirect auto lender care about customer experience?

Indirect lenders need to care because dealers care. In a recent study, Point Predictive found that waiving a proof of income stipulation increased the probability a lender would capture a loan by 40%. While not as impactful, waiving proof of residency, employment verifications, references, and prefunding customer interviews all drove higher capture rates too.

Companies like Tesla, Carvana, and Vroom have been changing how consumers buy cars by driving an improved purchasing experience, and many dealer groups have adapted their processes to do the same. The lending process is a critical component to that customer experience. Auto manufacturers have known this for a long time hence their captive finance companies (and Stellantis’ recent acquisition of First Investors). Now dealer groups are moving towards having their own finance companies to facilitate a better experience too. Carvana recognized that need early on, Vroom recently acquired United Auto Credit (UACC), and AutoNation, the largest dealer group in the United States, just acquired CIG Financial.

Consumers have come to expect something different, something easier, painless, and frictionless when making purchases, and auto dealers aim to give the people what they want. In the experience that consumers envision there isn’t time spent waiting for an underwriter to get back from their lunch break so they can get a decision or going home to get their pay stub or trying to remember their password to retrieve it online. There isn’t the hassle of texting friends and family to get their addresses for a knowledge-based authentication (KBA) quiz. Consumers don’t want to have to go find a current utility bill and they also don’t want to talk to the lender about the car they just purchased especially if it means they might have to take it back to the dealer after showing it to their friends and family.

The most progressive lenders have already pushed themselves to automate their underwriting process to provide faster responses and fewer stipulations by leveraging new technologies and alternative data sources. Now fast followers are moving in the same direction to maintain

valuable market share and dealer relationships while even some of the most conservative lenders in the country are exploring how they can adapt to the changing sales practices in the auto industry.

At Point Predictive, we work closely with the most progressive auto lenders providing data and technology to help them drive a superior customer experience. We can help you take another step in that direction too.