INDIRECT AUTO LENDING TRENDS IN 2023

The economic shutdown that occurred in early 2020 in the US due to the coronavirus pandemic reduced sales of new vehicles by 38%, disrupting the auto industry. Since vaccines helped open the economy back up, a sharp uptick in demand made an impact on indirect auto lending trends in 2021, and this uptick increased for both new and used vehicles. Contributing to this pent-up demand were dealer incentives, manufacturing shortfalls that caused prices to rise, and low lending rates, along with the K-shaped recovery that favored financially well-situated borrowers.

This rise in vehicle sales presents opportunities for auto lenders who can effectively respond to two specific indirect auto lending trends in 2023, which are:

1.     Offering a completely digital indirect lending experience. 

2.     Providing rapid decisions that can significantly boost a dealer’s chances of moving a vehicle off the lot. 

The key to successfully delivering on these trends relies on integrating innovative technology that eliminates the time-consuming manual steps and paper transactions.

Customize Your Indirect Auto Lending Program Need to Meet Dealer Needs

Dealer expectations for indirect lending should focus on fast approvals for prospective buyers. To meet these dealer expectations, auto lenders need to offer an indirect lending experience that:

• Has an intuitive user interface that shows accurate rates and programs tailored to a dealer’s buyer segments.
• Allows a dealer to shop rates and programs using simple queries to find deals that match well with motivated buyers. 
• Can quickly restructure existing deals online to obtain alternative financing options.

Provide dealers with an intuitive self-service portal that offers programs and rates specifically tailored to the dealers’ market segments.

Streamline the Indirect Auto Loan Application Process

When a dealer and buyer agree on the price of a vehicle, the loan or lease application process should also be streamlined. Dealers should be able to submit applications that are completely digital, including with them any required images of digitally recorded driver’s licenses, income statements, or employment confirmations. The most efficient lease or loan applications take just a few minutes to fill out. 

With modern loan origination software, it’s possible to review an application and return with an offer in seconds. Decision rules and workflow automatically apply credit policies to the application, reducing the need for manual tasks and processes. Prime and super-prime applicants can receive approvals and offers in seconds without needing an underwriter review. Applicants with lower credit scores can also receive conditional approval with specific stipulations.

Boost Indirect Lending Opportunities Through Risk-Adjusted Terms 

Auto lenders who want to improve their ability to offer the best risk-adjusted terms should incorporate trended credit data rather than rely on traditional credit score snapshots. Trended credit data provides a more accurate assessment of a borrower’s current financial strength. Trended credit data can increase a lender’s chances of booking a deal by offering very competitive rates and avoid risk by declining applications that might otherwise have been approved based on traditional credit scores alone.

Make It Easy for a Borrower to Accept an Offer

Loan origination software that supports digital applications and rapid decisions should also make it easy for a borrower to review and accept an offer. Offers can be delivered as e-contracts and reviewed online via desktop or mobile device, eliminating any delays associated with paper. Furthermore, with e-contracts supported by e-signatures, a borrower can accept terms and conditions immediately.  

Encourage Dealers to Do Business With You by Implementing the Latest Indirect Auto Lending Trends

Lenders can differentiate themselves from other lenders by offering a completely digital lease or loan application experience that includes rapid decisions and digital confirmation of offers. To further impress dealerships, lenders can tailor their indirect lending program to the needs of each market segment a dealer serves. But perhaps most importantly, it distinguishes a lender as being on top of the latest indirect auto lending trends to make financing easier. Now is the time for auto lenders to incorporate the latest technology to take advantage of the increased demand for new and late-model vehicles and the new indirect lending opportunities it offers.

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