Economic Uncertainty, Higher Interest Rates Drive Need for Omnichannel Auto Finance Communications

Driving Need for Omnichannel Auto Finance Communications

Boy, what a difference a few months make. Since May, the situation for auto inventories along with interest rates have changed dramatically. The number of vehicles on dealers’ lots are up but so are interest rates, spurred by a Federal Reserve that is rapidly raising its federal funds target rate to fight inflation.

What hasn’t changed is the need to communicate effectively with borrowers. They are preoccupied with job and family responsibilities, bombarded by relentless news and social media, coping with new strains on household budgets and are always on their mobile phones.  To break through the noise, auto finance companies should leverage their regular billing and other communications sent via the customer’s preferred channel, which increasingly is digital.

Car debt weighs on economy and household budgets

At about $1.5 trillion, U.S. auto-related debt represents the third-largest consumer credit market.

The average interest rate on a new-car loan in the U.S. reached 5.7% in the third quarter of 2022, the highest since 2019, according to Edmunds. The average new-car loan is about $40,000, 15 percent higher than pre-pandemic levels, and the average loan for a used vehicle is more than $28,000, 35 percent higher than pre-pandemic levels, according to the Federal Reserve Bank of New York.

Of course, higher loan balances and higher interest rates make for higher monthly payments. The Consumer Financial Protection Bureau (CFPB) says there’s been an increase in average monthly payments across all credit tiers of between 13 and 19 percent from 2021 to 2022.

Falling behind in auto payments

No one wants consumers to fall behind in their auto loans, but unfortunately it looks as if that’s already happening. According to the CFPB, loans originated in 2021 and 2022 are starting to show higher delinquency rates relative to loans that originated in previous years. The CFPB says this disturbing trend is even more pronounced for consumers with subprime and deep subprime credit scores.

Proactive communications is key

Being proactive with consumers is critical, especially if there’s economic hardship. On monthly statements, consumers want to easily find the amount owed along with the payment due date. It’s also important to prominently display customer service contact information and payment options on communications, including if there’s any flexibility on payment amounts. Plus, auto finance companies can help consumers stay ahead of a late or missed payment with alerts and reminders that are easy to digest.

Catering to consumer preferences

Customer communications management technology can help auto finance companies stay nimble in response to changing business conditions while also staying close to their customers. Our Expresso™ CCM hosted managed service gives companies the power to create and distribute paper, email and text communications on a single platform, using the same data file, and catering to any combination of customer preferences for bills, payment reminders and more. It also makes it easy to develop and update personalized messaging.

Omnichannel CCM technology also makes mobile communications that streamline payments fast, easy and effective. Auto finance companies can automatically upload digital statements into Apple Wallet and Google Wallet on smartphones using ExpressoWallet®. Monthly payment amounts, loan balance and payoff amounts are presented in real-time, with convenient customer connection links to payment portals and push notifications that alert borrowers when a payment is due or has been received.

Consumers are becoming more comfortable using digital wallets, including for payments. The bi-annual ACI Speedpay Pulse consumer survey for the first half of 2022 from payments processor ACI Worldwide found that when paying bills, 49 percent of consumers would consider using a mobile wallet compared to 36 percent in 2021.

To learn more about how we can help you meet the communications and payment method preferences for consumers who finance their vehicle, connect with us October 26-28 at the 2022 Auto Finance Summit at the Wynn Las Vegas. Schedule a meeting now with us at Booth #524.