How To Generate Auto Finance Leads And The Growth In the Industry

A mixture of anxiety and excitement gripped both investors and prospective car buyers alike following recent reports of a spike in special finance lending in the automotive industry. Subprime lending refers to short-term financing for borrowers with low credit scores (challenged credit). Generally, risky borrowers with credit scores of less than 680 find it difficult to obtain car loans from mainstream financial lenders. However, this trend is slowly shifting according to a recent report from a conference hosted by Standard & Poor?s Rating Services. During the conference, it emerged that US investors bought close to $5.8 billion in asset-backed securities from auto lenders in the first quarter of 2012. This figures stood at $3.5 billion during the same period in 2011, denoting substantial growth in the industry since last year.

Growth of Subprime Lending In The Auto Industry

Figures from Experian Automotive, a branch of the Experian credit bureau, clearly illustrate the growth of non-prime lending. In the first quarter of 2012, almost 23% of all new car loans issued to customers in the US were subprime loans. The total amount of credit issued by lenders for used vehicles during the same period stood at 57%. These same figures stood at 21% and 55% respectively during the first quarter of 2011.

The lower interest rates for subprime loans are also an indicator of the growth of this market. The report from Experian shows that even customers with very low credit scores (also known as deep borrowers) have to pay an average interest rate of only 17.9% on their loans. The figure for customers with very good credit score (also called super-prime borrowers) is 4.4%. When these figures are converted to monthly payments, the deep non-prime customers have to pay a monthly payment of $356, whereas a similar loan by a super-prime borrower needs a monthly payment of $345.

A recent survey by the Fair Isaac Corporation (FICO) shows that auto lenders are willing to offer loans to customers with scores of less than 680. Albeit only 25 percent of these lenders expect this line of credit to experience further growth as the year progresses, most respondents expect the biggest growth to come in the form of auto loans.

Possible Reasons Behind The Growth of Non-Prime Auto Lending

There are many theories surrounding the recent extraordinary rise in auto financing. Most observers point to low-cost funding as the primary reason for this trend. Before the US spiraled into the recent downturn, acceptance to a car loan was incredibly difficult to come by despite impeccable credit scores. Now that people are avoiding subprime mortgages like a plague due to its disastrous results, lenders are shifting their efforts to auto loans to attract wary clients back to the fold.

Overall reduction in gas prices is also a major factor contributing to the popularity of automotive funding. As gas prices gradually subside, more people are looking to buy vehicles for their day-to-day uses. Auto dealers are taking advantage of this new demand to offer rebates, incentives and low-interest loans to prospective car owners.

Finally, auto loans are known for their lower rates of delinquencies when compared to other types of loans, such as housing loans. People need their cars to travel to and from work, which earns them an income and makes it possible for them to make their monthly loan payments.

Lead Generation Techniques Utilized By Car Sellers

The growing demand for vehicles and high availability of financing options creates a need for auto finance leads generation among dealerships. Effective lead generation techniques are likely to bring in more customers in need of credit to finance new or used cars to ones storefront. Today, online lead generation is the primary mode of attracting prospective buyers, albeit old school sales tactics are also commonplace.

Some of the auto finance leads generation techniques in use today include:

Newspaper Classifieds: The target customers for this technique are mostly older people who are looking to buy new and used vehicles.

Radio and TV Advertising: This expensive method is mostly used only by larger dealerships that are in a partnership with carmakers. It mostly targets people working from home, as well as housewives.

Posters and Banners: This traditional method of lead generation is used to target local customers in small communities and towns.

Internet lead generation: Online lead generation for auto financing is the most touted of all lead generation techniques. This is mainly because of the leveraging power of the internet that online lead generation companies use to collect customer data. For instance, such companies can target auto-sales websites, used car domains, online banner ads, pay-per-click ad copies, online displays and other forms of online advertisements, to track prospective customer?s details. This information may prove useful in separating likely car buyers from general shoppers in the market. However, online lead generation websites usually sell their information to car dealerships, making the technique quite expensive for small-scale dealerships.

Many financial agencies are upbeat about the rapidly growing subprime auto industry. Financial experts point to several factors contributing to this growth, albeit overall recovery of the credit market is a big factor. This availability of credit is creating the need for auto finance leads among dealerships in the market. A combination of the techniques described above will come in handy for dealerships in search of auto customers.

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Source: http://personalloansrates.net/how-to-generate-auto-finance-leads-and-the-growth-in-the-industry/

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