Think Beyond The Rate

Bread and butter car loans don’t have to be boring

Here’s a product idea for car loans I’ve had kicking around my head for years. It’s yours, free of charge. (Of course we’d certainly love to help with marketing strategy and creative.)

The plain old car loan is every credit union’s bread and butter. It’s also kind of boring. No wonder your members look at your incredibly low, super low, really low car loan rates (which are very low) and emit a slightly puzzled “meh.”

As we all know, auto loans are a commodity. Everyone has them, and to most members their loan rate is less important than how fast they can escape the dealership with the keys.

So how can a credit union make sure its auto loans stand out in a sea of commodities?

By solving problems common to everyone who owns a car: all the additional costs of car ownership such as insurance, oil changes, tires, plates, inspections, unplanned repairs, and all the rest.

What if a car payment covered some or all of the expenses of car ownership in one predictable payment?

In its simplest form, this could be a car loan bundled with a credit card with a set limit that could be used for repairs, maintenance, tires, etc. The card could terminate or convert to a regular credit card after the car loan is paid off.

Or, perhaps you could roll in a special savings or checking account used to automatically pay for insurance, plates, etc., similar to an escrow account used with a mortgage. Automatic payments could be monthly or synced to the member’s Direct Deposit pay schedule.

If you’re in a decent-size city, there’s a ready market for all-in-one financing for ride sharing drivers. I once rode with a Lyft driver who buys a brand new Prius every 18 to 24 months. He has to get financing through a bank because his credit union won’t lend to ride sharing drivers. (How messed up is that?)

“Everything But Gas” loans could also be spun into a great product for people on tight budgets, or who might have a few dings in their credit. Set appropriate rates based on risk, partner with a reliable dealer who offers good, inspected used cars, and you could take a lot of the uncertainty out of car ownership. The loan payment could also roll in deposits into a savings account, so the member has a cushion for unexpected expenses, and perhaps a leg up on the down payment for the next vehicle.

With a little legwork, lots of local partnerships that add value would be possible, too — everything from discounted car washes to extended warranties, tires, maintenance, trustworthy repair shops, and oil changes.

The same concept could also easily be adapted to make a killer “Electric Avenue” loan aimed at families adding an electric car as a second car. Maintenance costs for electrics are lower, but they still need tires, brakes, etc. and the loan could also cover the cost of installing a charging station in the garage.

It’s time to think beyond the rate if you want members to stick around after paying off their car loan.

Target specific problems unique to your members, be creative in leveraging and bundling products you already offer, and you might be surprised at how much value and “stickiness” you gain.

Brian Wringer

Email this article to a friend or coworker.