Dealerships Find a Shrewd Strategy to Reconnect with Previous Customers through Refinancing Offers
Auto Dealers Can Boost Sales and Customer Retention with Proactive Refinancing
In a high-rate, high-inflation environment, auto dealers have a valuable opportunity to re-engage with customers through auto loan refinancing. By identifying customers who could lower their monthly payments through refinancing and reaching out to them, dealers can boost customer retention, generate new leads, and strengthen lender relationships.
According to research, nearly 18 million U.S. consumers are currently paying above-average interest rates and could benefit from refinancing to reduce their monthly payments. Dealers who educate and assist these borrowers effectively re-establish contact and loyalty while helping customers save money.
Refinancing offers dealers a chance to ask customers about trade-in offers, boosting dealers' used-car inventories and potentially resulting in a subsequent sale. Moreover, customers who refinance tend to be more financially savvy and engaged, leading to higher-quality leads.
By partnering with lenders, dealers can receive bonuses, incentives, and cooperative marketing support. Dealers can also leverage refinancing as a tool to generate high-quality leads from financially proactive borrowers.
Dealers can use tools like TransUnion TruVision LTV, Experian Auto Credit Prescreen, Equifax Prescreen, and risk-based marketing and dealer management system (DMS) integration software from vendors including CDK Global, Reynolds & Reynolds, and Dealertrack to prescreen existing customers for refinancing opportunities.
Lenders should consider targeting qualified borrowers for refinance opportunities, particularly those previously financed through the dealer. Refinance borrowers were 170 basis points less likely to be 60+ days past due after a year, according to TransUnion's analysis of Q4 2023 loans. The near-prime segment shows an even larger performance gap, with refinance borrowers being 320 basis points less likely to be 60+ days past due.
With the right tools and lender partnerships, dealers can turn this financial pain point into a win for both the customer and the dealership's bottom line. Revenue streams for dealers may include bonuses or incentives from lenders, and dealers can explain supplemental products and services to customers during refinancing discussions.
In summary, auto dealers can benefit by proactively marketing auto loan refinancing to former and current customers likely to save money, using refinancing opportunities to reconnect, enhance loyalty, and cross-promote additional products and trade-in offers, partnering with lenders to receive bonuses, incentives, and cooperative marketing support, and leveraging refinancing as a tool to generate high-quality leads from financially proactive borrowers.
Leveraging technology and partnerships with lenders can enable dealers to identify and approach customers paying high interest rates, offering them an opportunity to refinance and reduce their monthly payments. This proactive approach can strengthen lender relationships, generate new leads, and boost customer retention, making it a valuable business strategy in a high-rate, high-inflation environment.
By implementing tools such as TransUnion TruVision LTV, Experian Auto Credit Prescreen, Equifix Prescreen, and risk-based marketing and dealer management system (DMS) integration software, dealers can efficiently prescreen existing customers for refinancing opportunities, effectively targeting potential savings and boosting sales.
