5 Steps to Planning Your Auto Loan Refinance & ReCapture Strategy

With great auto loan rates, your credit union is the best place for members to finance their next car. And then there’s the refinancing. All those people potentially overpaying for their loans? Well, we can’t have that, right?

You know your rates are competitive, and that you can save many people money every month. So a recapture program could find great success, both for the bottom line and your mission of financial empowerment. The question becomes, how to make it happen?

There are a few approaches:

• Do it all in-house
• Partner with a vendor to help you along
• Pay a vendor to just handle it all

This article helps you choose and make it happen.

It may seem like doing it in-house is the cheapest and simplest option, but that’s not necessarily the case. Depending on the capabilities of your LOS and how much you can stretch your marketing team…the costs are just shifted somewhere else.

Finding that balance means looking at your operation with respect to your staff, their current responsibilities, and the flexibility of the institution. Sometimes, spending more in one place actually means spending a whole lot less to get the same result.

What’s cheaper? Hiring an electrician to install new lighting in your home, or just buying the lights and doing it yourself? If you’re already skilled and have the time to spare, it might make sense. But what about when obstacles emerge? Are you prepared to handle them?

In that case, spend the extra few hundred dollars and let the electrician get it done right and in a timely manner. You can still buy the lights to save some money, but let the experts do their thing. Think of your members as the other members of your household. Which situation would they prefer?

Member Experience Drives Decisions

You know member experience is critical. So every decision process must put them first, then work backwards to how your institution can make that ideal happen. Of course, along with their satisfaction is also driving your credit union’s goal of generating loans.

Both are possible, together. In this article, that conversation revolves around your approach to recapture and refinancing of auto loans. Beyond additional costs and frustrations, the wrong choice can mean the difference between a positive and negative ROI.

Deciding On Your Recapture Strategy

We understand all institutions are different, as are their communities, so “right” and “wrong” approaches can vary. In working with potential credit union partners, we are almost always asked, “ok, so which strategy is the best?”

Sure, they’re expecting us to say, “our own, of course!” I mean, we do feel what we offer is the best option for most institutions. Otherwise, we wouldn’t be representing it. And credit union decision-makers like you often decide that is the best fit. Sometimes, they don’t. And that’s ok.

“How do we choose an auto loan recapture strategy” is a big, wide question. We address it by learning about their challenges, needs, and expectations. It’s something we’d be happy to do with you. For now, you’re here to do your own research, so let’s get into it!

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What to Consider When You’re Considering (Recapture Edition)

This article addresses the top 5 things to consider when you’re considering a refi strategy. They’re just what we’d ask in a meeting, and whether you plan on meeting with other providers or approach it in-house, it’s important to have your answers on deck.

In our experience, these 5 considerations make the difference between successful programs and those which just sputter along, impressing no one.

As a provider for credit unions since the 1980s, we have a “favorite horse” in this strategy. We choose to offer the Clutch recapture platform. Why? Because their wildly-simple 3-step refinancing is what we believe your members (and CU) want.

Of course, we understand this service may not be a fit for every credit union. It’s also our responsibility to share what we’ve learned during our research to help you evaluate refinancing and recapture services.

Ready? Let’s start being choosy!

5 Steps to Choosing an Auto Loan Recapture & Refinance Program

1. Know Your Objective
2. Set Goals
3. Decide on a Budget
4. Analyze Your Resources
5. Draft a Marketing Plan

Let’s start at the very beginning, a very good place to start: Why are you even bothering with this journey?

1. Know Your Objective

Sure, you want more loans, greater share of wallet, and more members. Ok, those are all great, but more is only part of the rationale for this recapture effort. Having a clear vision of the what will let you filter down the how.

We’re big supporters of financial empowerment. Thus, our first thought in a recapture discussion is saving members money, allowing them more financial freedom to achieve their goals. Of course, you have strategic goals as well.

More Members

Let’s say member acquisition is a top objective. In that case, targeting, reaching, and following up with the right people is priority one. Consider the target demographic, population segment, and other characteristics necessary to engage. You could call this your “buyer persona”.

Keep in mind the mediums used to get in touch, and any expenses which might be involved for each. If you’re emailing, does your opt-in list include a good portion of your target membership? Physical mail can get expensive, while vendors might include it in their service.

More Income

Perhaps generating non-interest income is a primary credit union objective. Then your recapture program needs to both draw attention and effectively communicate your ancillary products, giving members the opportunity to learn on their own and “sell themselves”.

Remember, if members only learn about GAP during the loan closing process, they’re more likely to say, “no, thanks”. Each protection product must be presented at every step so they recognize them as more than just an expense of extra dollars per month.

If you’re speaking with other providers, make sure your ancillary products can be featured, and that you even have the ability to mention them. Ask to see the experience from your member’s perspective, then plan to train your team to accommodate that approach.

More Wallet-Share

Sometimes the objective is simple: Help move each member into a deeper credit union relationship. It’s not really the future of banking, but we understand it’s still a KPI for many staff to reach. The experience of each service is what matters. So let’s make it great.

Recapture, by definition, involves connecting only with existing members. There’s a big perk here: You have their basic info and permission to reach out. How does this help? Because that makes engagement far easier for in-house efforts.

Additionally, you could provide API access to your member database to a trusted fintech partner. With that info, their system can autofill forms, provide data on existing loans (not from your credit union), and import data straight into your LOS, linked to the member file already.

In other words, creating a fast and smooth process for both your members and your staff. While meeting expectations of digitally-native members.

More Everything

That’s not really an objective, now is it? You’re asking the sales team to share their quarterly production goal and the response you get is, “yes”. In the same way that making your target audience “everyone”, this isn’t the best approach.

Figure out what your team wants most (and can achieve within budgetary, time, and staff constraints). Our opinion? If this is the position of the board or C-suite, you’re in need of a fintech partner to rapidly increase your capabilities.

In all honesty, set up a chat with us at your earliest convenience. We’re not looking to sell you, just help you focus on what’s most important. And if there’s someone we think can help, we’ll refer them to you.

2. Set Goals

Measuring success isn’t just for after a program is running. Setting goals ahead of time helps you decide the resources necessary, and even the type of approach which makes the most sense. What are some typical variables for assessing success?

• # Booked Loans
• Loan Volume
• Non-interest Income
• ROA

For the first three, set both short and long term goals. Consider what you’d like to achieve for 30, 60, and 90-day campaigns. Do they seem possible for all potential approaches? This alone may help you decide whether to go in-house or work with a FinTech partner.

Of course, as your campaign is running, have set intervals to take benchmarks. At each point, measure success against projections. Then you can review and tweak for best results.

3. Decide on a Budget

How much do you want to spend? Upfront? Ongoing? This will help you decide whether an in-house or vendor approach fits your strategy. In our experience, there are two common ways of paying for recapture services:

• Upfront: Buy the platform, service, or package upon contract execution
• Performance-based: Low or no upfront costs. Payment is based on a percentage of each closed loan. This can range between 1-3% of loan amounts.

Keep in mind, some vendors require your credit union to relinquish rights to sales and revenues of your protection productions. We don’t believe that sacrifice is worth it, especially when protecting your members is a core part of your mission.

4. Analyze Resources

Your staff wears a lot of hats. Even with their skills, there’s a limit to just how many. When you do things in-house, it means lots of time from your team, including marketing, sales, outbound, and administration. Working with a vendor solves many of these time constraints.

Take stock of your resources in concert with results from your previous steps. If you’ve been looking for member growth out of a refinancing campaign, this is when you can step back to see if it’s a reasonable tactic.

With direct mail, advertising, and list building/management, working outside your membership increases resource requirements. Most likely, there are large opportunities for revenues and member savings just from inside the credit union family.

Wasting time and money stinks. So here’s a tidbit we want to share: In normal campaigns, up to 90% of refinance applications end up incomplete and abandoned. Whether in-house or partnered, identify those friction points and make it easy for members to save.

5. Draft a Marketing Plan

Consider this the “assembling your strategy” section. Take everything you’ve decided thus far and build a plan. Figure out who does what, when things should happen, and factors involved at each step. We’ve written a lot about marketing planning for credit unions.

In this case, it’s about taking steps 1-4 and assembling them into a focused approach. Ensure your marketing and lending teams work together to build the plan. Consider necessary resources and, if there’s a vendor involved, bring them in the loop, too.

Put Your Plan In Action

With a clear objective, focused goals, solid budget, understanding of your resources, and a clear marketing plan, it’s time to make things happen! By now, you likely know whether you’ll go it alone, partner with a vendor, or take a hybrid approach. Here is an example:

“Maybe Yours” Credit Union: Focused on member acquisition and auto loan growth. Goal is to close 100 auto loans through refinancing while generating $100,000 in interest and non-interest income. The budget is $20,000.

Needed Items:

• Targeted list (Is your member database info current and correct?)
• Direct mail collateral
• Packaging design
• Postage
• LOS access (Do you pay per application, even if they are abandoned?)

Human Resources:

• Loan underwriters
• Website developers & social media team
• Inbound and Outbound member outreach representatives (Phone, email, SMS, etc.)
• Training so everyone is aware of program

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If considering in-house, ask your team these questions:

• Do you know your prospect conversion rate?
• Is existing loan information used to compare to their estimated offers?
• Does your budget cover expected costs?

If the answer to all these questions are yes, in-house may be a good choice. In most cases, though, credit unions don’t have systems to eliminate the friction normal to the process. As a result, conversions fall and costs go up. Your $20,000 budget may not earn those 100 loans.

Specialized vendors can offer more cost-efficient and member-centric tech. Plus, you simply provide the goal and budget, then they build a campaign to meet (or exceed) it. Depending on the provider, they may also only charge for the loans you book.

If you haven’t seen what recapture vendors offer recently, you owe it to your members to take a look. Some have ease-of-use and backend functionality which seems like magic. To your younger members, it’s just what they expect…a few phone taps and it’s done.

On your end, all documentation (including GAP and VSC) is generated and available in your LOS. You just need to verify the rate (if not using automated underwriting) and request a digital signature. That’s it. We’ve never seen an in-house approach nearly as simple.

With performance-based pricing, that budget can provide your 100 loans (at 1% per $20,000 booked loan) while delivering substantial non-interest income in ancillary products. You could see tens of thousands in GAP sales alone.

Whatever approach you choose, we want you to be successful in raising revenue and saving your members’ money.

Recapture Right

Both Refinance and Recapture strategies can drive credit union success with the proper alignment of marketing, vendor choices, and member experience.

We believe partnering with great companies allows your credit union to embrace today’s technology without massive investments. Thus, we represent the Clutch Recapture System for Credit Unions. Featuring a 3-Click system and LOS integration, it’s worth seeing.

Offered through our cuZOOM! suite of services, we recommend you schedule a no-nonsense demo to see if it might be a fit for your credit union.

Curious about recapture providers, ideas, and updates? Visit our Recapture & Refinance section. And be sure to keep informed of updates by Subscribing to the Learning Library.

With 1-2 emails a month of valuable and industry insights, it may be one of your favorite new emails! Until next time, keep it honest!

Image credits: Puzzle strategy & chalkboard step by step by Gerd Altmann. Blue car mirror by Michael Kauer. Dart board by OpenClipart-Vectors. Wallet by e-gabi. Person pulling chart by Mohamed Hassan. Hats by wal_172619. All from Pixabay. Clapper by Tima Miroshnichenko and using iPhone by Tim Samuel from Pexels.