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Four Ways to Improve Auto-Loan Refinance Results
Monday, September 29, 2014 6:50 AM

Thanks to an improving economy, consumers are returning to car dealerships. That opens up opportunities for credit unions. Some new car buyers will end up with interest rates, loan terms, and warranties or payment protection options that your credit union can beat. The trick is finding these buyers and delivering an effective message.

Auto loan refinancing programs can help you reach these car buyers, but beyond that, according to CUNA Mutual, four factors will affect the results of your efforts:

  1. A properly pre-screened mailing/email list. Selecting the proper parameters for pre-screening membership data takes experience. It's easy to make mistakes—such as not screening out your credit union's own auto loans—that will cost the credit union money or result in too many non-qualified members receiving letters.
  2. An incentive. Consumers are bombarded with auto loan offers with impressive-looking interest rates. Make your offer stand out by offering something useful, like a gas card. If you project that your interest margin will be too thin to justify the cost of an incentive, consider offering favorable terms such as deferring the first payment for 60 or 90 days. Be sure any incentives comply with limits or restrictions required by state or federal regulations.
  3. A strong, professional, legally compliant letter/email. When creating the marketing piece, try to be objective about your in-house copywriting and design capabilities. The design and packaging need to compete for a busy person's attention, and the text must make your offer compelling enough to draw a response—these are jobs for experienced direct-marketing pros. Keep in mind, however, that your credit union is responsible for ensuring that the language complies with regulations, so choose a partner with credit union experience in your state.
  4. Service-oriented cross-selling skills. The letter you use is a springboard to conversation. Lending staffs must be trained to engage members to learn about the member's financial situation and find additional credit union products and services that meet their needs. Creating a stream of non-interest income through warranties and payment protection products could help offset the cost of the campaign.

Each campaign should include a return-on-investment analysis including refinance loans closed for those on the mailing list, the average credit score and loan balance for all respondents, and other factors.

In addition, measure the "halo effect," that is, all of the products—not just auto loans—acquired by those on the mailing list over the following six months. If you consistently see a halo effect, it's a good indication your campaign is running effectively.


(Source:  CUNA Mutual)