Owning a Car Is Getting More Expensive: Here’s How to Support Your Members
By Patrick Lynch, Vice President of Automotive Sales | Allied Solutions
Americans are more reliant than ever on their vehicles for frequent, reliable, and consistent transportation, especially as states re-open and in-person activities resume. But preparing the roadster for summer fun and travel also puts the rising cost of vehicle ownership in the spotlight.
The average annual cost of owning a car is $9,282, which is up 5% within the last year, and repairs including general maintenance and tires is nearly 9 cents per mile. Gas prices are high and staying high. With these conditions, credit union members are particularly sensitive to options that can help them manage their auto costs. Keeping members informed can promote both individual financial stability and the credit union’s income.
Even if you’re already offering each of these services, consider amplifying your messaging so members are fully aware of their options at every stage of their auto ownership journey.
Payment deferral options
During the worst of pandemic disruption, skip-a-pay programs were heavily trumpeted to borrowers concerned about making ends meet. Because these programs are receiving less attention, some members may not understand that deferral remains a valid choice today. Members gain some breathing room on monthly expenses, and the customary fee supports non-interest income goals for the institution.
Loan modification and refinancing
Borrowers under more chronic financial strain are not always able or willing to take the initiative and start a conversation about finding a new path that allows them to keep their vehicle and avoid a major negative credit event. Credit unions, meanwhile, would typically rather keep a member on the road than send a repossessed vehicle to auction. Being assertive about refinancing options, and establishing a special hotline for loan modification options, can help invite borrowers in difficulty to follow your lead.
Mechanical breakdown protection coverage
Offer borrowers an option to manage ongoing costs and avoid surprise repair bills at the time of purchase by adding a Mechanical Breakdown Protection (MBP) product. Sometimes known as Mechanical Breakdown Warranty, these products cover charges associated with vehicle interior issues such as heating/air conditioning, windows, and steering, as well as exterior repairs such as brakes, seals and gaskets, and transmission. Plans can be expanded with 24/7 towing, roadside service, and rental reimbursement to further reduce uncertainty, and transferable coverage which can increase the vehicle’s resale value.
Other point-of-sale products
Guaranteed asset protection (GAP), vehicle protection plan (VPP), and depreciation protection options can further provide peace of mind against theft, total loss, and exterior damage. Like MBP, these products open new non-interest income options for credit unions while reducing cost-of-ownership uncertainty for borrowers.
Alternative loan modification and exit strategies
Dig deep in the playbook when borrowers are in a bind. For circumstances that don’t warrant a full monthly payment skip, consider a due date modification. Or if no short-term adjustment will do and a borrower simply has more car than they can afford, align with them to discuss options for a loan assumption or a voluntary surrender. These options are less abrupt and typically carry lower fees for the borrower than an involuntary repossession.
Allied Solutions is proud to be NAFCU’s Preferred Partner for Mechanical Breakdown Protection (MBP). We can also help you understand the compliance impact as well as the marketing opportunities of a variety of point-of-sale options to help members better control their auto ownership costs.