NAFCU Services Blog

Dec 06, 2023
Categories: Consumer Lending

The Most Pressing Topics at Open Lending’s 2023 Executive Lending Roundtable

By:  Open Lending

Each fall, Open Lending invites automotive lending leaders to convene for a three-day networking conference. The event’s key objective is to address the current realities of the industry — what challenges are borrowers and lenders facing? What can we expect over the next 12 months? We’re honored to host our peers and colleagues and view this annual event as an opportunity to foster the sharing of ideas and the building of partnerships in the lending space.

This year, the economy was a focal point for attendees and presenters as lenders reacted to interest rates and inflation’s impact on vehicle inventory and prices. Explore the main themes and takeaways discussed during this year’s Executive Lending Roundtable.

Liquidity at an All-Time Low

No financial institution is immune to liquidity pressure. And while some of the country’s largest banks have opted for stricter lending standards or have closed the door on automotive loans altogether, not offering automotive loans is simply not an option for the lenders we heard from. During one panel discussion, Scott Arkills, President and CEO of Silver State Schools Credit Union, shared that his institution’s liquidity is hovering around 6%-7% compared to just a couple of years ago when it ranged from 20%-30%. 

A shared opinion among event speakers and participants was the importance of consistency, particularly when it comes to lending criteria. So, while taking a more conservative approach to lending isn’t the answer, some of our panelists have found success by increasing direct deposits and dividend rates. Ultimately, recurring deposits – from direct deposits to Social Security payments – are the best way to maintain liquidity. Panelists also agreed that using Lenders Protection™ has enabled them to bolster their balance sheets. With Lenders Protection™, lenders can make smart, profitable lending decisions while managing risk and exceeding ROA targets, enabling them to serve more borrowers.

Financing and Affordability Issues Impact the Underserved

According to Cox Automotive, the average price for a new car is around $50,000, while used car prices tick upward, with the current average at nearly $27,000. Near-prime borrowers are disproportionately priced out of the market as credit approval for automotive loans remains lower than just two years ago. According to Cox Automotive, credit approvals for automotive loans were down 2.4% YoY in May 2023.  

These trends only increase borrower anxiety. But as Kevin Willborn, Vice President of Consumer Lending for Gesa Credit Union, explained to attendees, Lenders Protection™ has allowed his institution to decrease anxiety by providing borrowers with a fair rate and delivering decisions quickly.

During a panel discussion with several lenders, all participants expressed the importance of serving near-prime borrowers and increasing vehicle lending accessibility wasn’t the only reason. Serving more near-prime borrowers diversifies portfolios and contributes to more resilient balance sheets. This sector of borrowers is also especially likely to remain loyal to institutions that provide them with automotive financing, creating future service opportunities.

“They’re used to being told no, so when we can give them a yes, it really sticks,” said Tammie Atoigue, Vice President of Consumer Lending for Sound Credit Union. Not offering financing and services to customers hampers profitability for most financial institutions. Lenders Protection™ acts as a growth strategy for lenders because it allows them to say yes despite external factors that might otherwise cause near-prime borrowers to be turned down.

Lenders and Borrowers Alike Expect Quicker Decisioning

Lenders are especially focused on enhancing the borrower experience, and speeding up decisioning time is a critical tactic. Open Lending’s Lending Enablement Benchmark Study surveyed nearly 100 automotive lending executives across financial institutions and found that slow decisioning speed is the top issue automotive lenders face with their current decisioning model.

Those who participated in the Lender Panel expressed how they create a better borrower experience and decrease borrower anxiety by using Lenders Protection™ to increase decisioning speed.

Faster decisioning is also a tremendous competitive advantage. Panel participants attested to how automated loan approvals significantly increase the likelihood of booking loans. “Our average look-to-book percentage is about 60%, and if you make that automated, it rises to almost 90%-95%,” Willborn said.

The automotive finance market is growing increasingly crowded, making capabilities like automated decisioning critical to secure loyalty and business from borrowers and dealers. Dealers look for lenders who can provide the best decisions first. Lenders Protection™ enables lenders to win those deals. David Brand, Chief Lending Officer for Sharonview Federal Credit Union, explained, “Seven days a week, whether we have underwriters working or not, we’ve got automation in place, where if it qualifies for Lenders Protection™, it’s populating all the decisions to the dealer, and there’s no human involvement needed.”

However, automation doesn’t and shouldn’t mean zero human interaction. Automated decisioning should be viewed as a tool that allows lenders to focus on tasks that technology can’t, like strengthening dealer relationships.

Automated decisioning also has the added benefit of removing bias from the loan process by analyzing deeper, richer data and delivering a more complete view of a borrower, risk, and profitability. Ross Busch, Indirect Lending Manager for Summit Credit Union, reemphasized the importance of consistency and how automated decisioning allows his institution to be more consistent and fairer, “Anything we can make more automated, more consistent and remove bias allows us to scale our business.”

For Automotive Lenders, Building Resilience is a Top Priority in 2024

Throughout all the discussions during this year’s Executive Lending Roundtable, the focus always came back to prioritizing the borrower. We’ve all been impacted by economic tailwinds. The financial institutions and lenders present expressed genuine empathy for the challenges facing their customers and members. But to be able to serve borrowers and make automotive financing more accessible, financial institutions must be profitable and resilient, regardless of the current economic landscape. “Yes, it’s important to say yes to more loans, but we have to be profitable as well so we can continue lending to our members and keep them in a healthy financial situation,” Atoigue said, “That’s what Lenders Protection™ allows us to do.”

Following another successful Executive Lending Roundtable, Open Lending is excited and motivated to help our customers achieve their lending goals and reach more near-prime borrowers. As 2024 inches closer, you can depend on us to help you navigate anticipated and to-be-discovered challenges and opportunities. Contact our team today to see how Lenders Protection™ can enhance your loan decisioning and growth strategy.

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