Why offer VSC?
Protect your members, right? By design, a Vehicle Service Contract helps:
- Protect your borrowers from the cost of unexpected mechanical breakdowns
- Protect your credit union from delinquencies and repossessions
- Generate a source of non-interest income for your credit union
That’s a nice set of features to promote. From the description, it seems worth discussing for every vehicle financed! Wouldn’t these be sufficient reasons to excite your staff so they confidently offer VSC to all your borrowers?
Why isn’t VSC championed by your team?
A VSC can be complex, with many choices, each difficult to explain, and borrowers can have questions your team doesn’t know how to answer. That’s uncomfortable. Plus, they’re expensive, which isn’t a great selling point. To top it off, online reviews tend to skew negative.
Sidenote: In my many years of computer troubleshooting, I have spent way too many hours in online forums. A common refrain when people claim that some feature is just broken is that “this is a hospital so most of those who come here are sick”.
You don’t go online and share all the things which work fine. You go to report what doesn’t.
This is the case in life. How often do you hear from members when their car gets repaired promptly at no cost out-of-pocket? Probably not so much. But if something goes wrong? You can bet they’ll be tweeting, calling, and Yelp reviewing immediately.
Negative experiences get attention. And for good reason. But it can also create an impression, just like in those forums, that everyone has problems and the product is inherently flawed.
Combatting the “It’s Not Worth It” Cycle
What does a haystack of negative feedback mean for your member services and sales team? If they believe your VSC program is of little value to borrowers, or more trouble than it’s worth, guess how excitedly it gets recommended. “Not much” is exactly right.
VSC sales penetration suffers, which causes a self-fulfilling circle of, “we’d sell it if it was valuable, but we don’t, so it must not be.”
You know the value of your VSC program, and also that not promoting it is doing a disservice to your borrowers. Especially when under 40% of Americans could afford a $1,000 expense without dipping into credit. To us, VSC is just part of the mission.
How can you and your team get motivated to provide awesome guidance while ensuring members have the information they need to make smart financial decisions? It’s as easy as scrolling.
So simple, we even put the process into 5 easy steps.
If you’re only able to achieve some of them right now, that’s fine! Start with those staff hearts and minds. Solicit ideas to implement in the face of time, technology, or financial challenges. Remember, your team is a great source of innovation; just ask!
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Step 1 – Education for the Team
If you’re going to offer a service, it’s already confirmed valuable for your borrowers. So if your team has a different perspective, those objections must be heard and addressed. Find out what they think and how they feel about your VSC program.
Bottom line: Would they consider it for their next vehicle, or, even more telling, would they suggest it for their family and friends?
If not, what’s holding them back? Their confidence is paramount to borrower buy-in. And you’re further enhancing that communication across your team.
Depending on what they say, your response will vary. However, through our more than three decades of experience with VSC programs, we recognize some common “objections”:
- Too expensive
- Not accepted at non-franchise shops
- Doesn’t cover what breaks
You can discover these and more with a few simple searches. Let’s see if they hold water for your own offering.
(Of course, nowadays, your information comes from online searches. Less so in the early 1990s!)
Reviews For Other Programs
When people search “extended warranty” or “vehicle service contract”, they discover results full of negative reviews. It feels convincing, yet those may not be representative of what you offer.
Those reviews are often based on dealer and even “mail order” contracts (the mail and email pieces that warn your vehicle’s coverage is expired and only they can help you avoid high repair costs). For these programs:
- There’s no “one-size fits all” plan. That’s why during your own due diligence, you ask for pricing on different coverages across a range of vehicles. You know this claim isn’t valid. Plus, who knows if that plan is as comprehensive as what your CU offers.
- “Expert” reviewers who claim VSC plans are never worth their value (Hint: If they say “never”, that’s a good sign they may not have all the information.). Credit union VSC contracts can be as much as 50% cheaper than a dealer-sold VSC contract.
- Did those reviewers purchase their program from previously-mentioned sources? It’s possible they not only paid more but also had a less rigorously-reviewed product. In other words, your due diligence reduces member problems ahead of time.
I feel bad for those people stuck with a more-effort-than-it’s-worth VSC. Remember, the better you do in presenting your program (even if they decide it’s not for them), the fewer of those situations will occur.
And what if you do find negative reviews for a credit union VSC program? Does that finally make up your mind? Remember, thousands of policies are sold each year. Even with a 99.9% satisfaction rate, there will still be a few issues. And that’s where training matters.
If your credit union teams up with a provider which provides regular training, you can proactively address every issue they have seen. At the same time, your own staff can voice their concerns and see how they can be overcome.
During conversations, managers love to share how FSRs have unique and helpful insights into all areas of member engagement. Keeping this communication channel open, even outside of training sessions, helps address issues before they become a member complaint.
Finally, yes we’re going to promote ourselves, because due diligence is what we do here on the GreenProfit Learning Library. On this topic, here’s a perfect article to get started: 7 Myths of Vehicle Service Contract Programs
Step 2 – Introduce VSC Early (Before & During Application)
Digital transformation made this step a lot more difficult. The COVID-19 pandemic accelerated the change from physical to digital. Even when “normal” returns, the shift away from in-person will not reverse.
Remember greeting your members in the branch, offering a cup of coffee, and assisting them in their auto loan application? Ok, you can do some of that, but with masks and distance markers for the foreseeable future. Better than nothing, but…
Consider your online (and mobile) application dominant.
What about the phone? People can use that through the transformation! It’s true, and that conversation provides massive value. During the call, your FSR helps the member gather necessary documents and introduce your car buying service.
Then, they can take the opportunity to introduce your protection products. This gives your borrower a first glance at why things like a VSC are worth considering. That way, when it’s presented at loan closing, it’s not some new upsell to get instinctually declined.
Meaningful Online Connections
Many of your borrowers do it all on your website or app. It’s delightfully “contactless”, which is great during a pandemic, but a real challenge when human connection is needed.
So how do you introduce and pique member’s interest in your VSC program, without having that face-to-face (or phone-to-phone)?
Content. Engaging content, to be precise. Engaging video content, to be annoyingly precise.
Exciting Explainer Video
Stick a video like our “You’re Special to Us” VSC introduction into the loan application process to quickly plant a seed. Yep, we’ve got a video (a whole series, in fact) to get you started.
That video (and the series) is available at no cost to your credit union. That means free. Whether you work with us or not. It doesn’t even matter which VSC program you have; it fits with them all. Oh, and it’s generic because we aren’t advertising to your members.
Place the video into the loan application process. Include it on the ancillary product description section of your website. Put it in the app. Some credit unions share them on social media, and others display on their branch monitors (for those still needing branch services).
If you love spending extra money and time, you can also make your own to present to borrowers. Though we think ours gets the point across, we won’t be insulted if you pass on it. Just ensure you have something that addresses the pain points and benefits of your VSC.
Tried and True Testimonials
“Your Vehicle Service Contract really helped my family and I out when we needed it most! Without the coverage, we would not have been able to afford the costly repairs. Yet the policy covered it all! Thank you CU!”Our hypothetical satisfied member
Since this all began with seeing online reviews, we know user feedback is powerful. Thus, testimonials are also effective as content. Everyone loves a great story, and hearing how your VSC program saved your members big money (and frustration) is valuable.
If you can encourage, or even reward, members for sharing their experience, that’s the start to some compelling content. I guarantee you have a member for which their VSC saved them from deeper financial struggles. Ok, I’m sold.
Make Members Aware
The whole goal is to ensure your members:
- Know you offer VSC (and other protection products)
- Understand at a basic level what they provide
- Recognize their potential value along with the loan
- Are aware that dealers can offer similar products at higher rates
Your credit union benefits when your members are more aware of what you can do for them. In fact, everyone benefits, and that applies whether they finance through your direct or indirect channel.
Which is a fabulous lead-in to Step 3, if I do say so myself.
You’re already reading about VSC programs. Get the facts for later reference in a quick-look format! Download our 5 VSC Facts Cheat Sheet!
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Step 3 – Loan Approval, or Excitement Builds
Your member’s loan application is approved! Now it’s just up to them to decide to use you for financing. Your job is only to wait, right? Not exactly. You have a number of tools in your belt. Of course, not everyone will go for a direct loan. Some just want to do it at the dealer.
For those institutions which have indirect lending, we’ve got a process for you, too.
Let’s start with the more profitable and less complicated approach, direct lending:
Even if your system provides an automatic engagement, it’s still a perfect time to reach out to your member (through phone, email, or text). Help them discover your next steps along the process. Because they see the loan as a tool for getting a car. You know it’s more than that.
What can you share with your members to exceed expectations, while also providing them tangible benefits (Read: Saving money now and possibly later)?
Car Buying Service
Your car buying service can save members time and money during their search. Plus, it keeps them close, so you know where they are in the process. If you already have an approved loan, this is a great medium to discuss their choices and how they fit.
In other words, your car buying service keeps members close. It can also help reduce “flipping” at the dealer.
Plus, depending on your car buying service, it can provide the “whole picture” of car buying. What’s that mean? Great question. We always focus on the loan rate and cost of purchase. Yet most people also have a trade-in. The value you get for that vehicle is crucial.
A negotiated vehicle price is only part of the picture. Having a guaranteed trade-in rate lets a member (and your institution) have full confidence in their new purchase, especially if they were using the trade to pay off an existing loan.
VSC and Other Protection Products
The lines of communication are open. Use that opportunity to re-introduce your VSC program. And selling isn’t about saying how great it is. Talk about actual costs and risks of mechanical breakdown. Pain points matter. Make it easy to review your VSC info now or schedule a chat.
That way, when they are ready for loan closing, it will be as understood as one can expect.
Not all members choose to go direct. And if you have dealer relationships, that’s ok. This time, your member’s loan application came through a participating dealer. Two possible events then happen soon after:
- Your LOS verifies the member’s application meets your underwriting qualifications and gets instant approval, or
- The application is directed to an FSR for further review.
With our hypothetical (yet akin to a real) member, everything is in order, they get a fabulous rate, and decide to use your financing. Then it’s off to the Finance & Insurance (F&I) representative at the dealership. Things get spicy here.
Outside of the service center, dealers make around a quarter of their profits from the F&I office. Inside, the member is offered a vehicle service contract, plus a menu of other protection products. Typically, they are more costly than those offered at your credit union.
Your member may purchase these services through the dealer (and do almost half the time), adding them onto the loan up to their approved amount. And they might be happy with what they receive.
However, if you followed the prior steps, they would know the benefit of purchasing through the credit union. They’d politely decline and contact your credit union to purchase after closing.
Sidenote: Yes, yes I hear you. If your member went to a dealer, purchased a vehicle, and financed through your indirect channel, when could you have educated them? Fair question. And if they never reached out or used your car buying service, that is true.
For this scenario, we’re assuming they at least used your car buying service, so you knew they were in-market (which is its secondary benefit for indirect borrowers).
In other words, the more members you inform about your car buying service, the better chance you have of promoting and selling protection products like VSC.
Step 4 – Loan Closing Like Humans
Contactless closing is the holy grail of auto lending, right? It’s so simple, fast, and saves time for all parties! Only, it can be a detriment to your members and credit union. Especially if you just stick to the funding portion.
My own car loan was remote. I completed some online forms, clicked through a few prompts, and spoke to one person on the phone for a few minutes. That was it. Now that I think about it, the phone call was unnecessary and just a confirmation the process was moving.
The “offer ancillary products” opportunity consisted of two screens I clicked past during the closing. “No thanks”, “No thanks”, and that was it. They were boring text descriptions of GAP, Payment Protection, and VSC. No videos. No testimonials.
The credit union didn’t even try to share a list of commonly-replaced parts (with their cost) on my vehicle. Ok, so I’m in the industry, but I never ran the numbers…how much hope does that leave for the average borrower?
Lost opportunities because their contactless closing didn’t truly serve the member.
Get Some Face(Time)
The traditional person-to-person closing is still the most efficient method of offering and selling a vehicle service contract. COVID-19 accelerated the transition from face-to-face. It’s up to you to creatively arrange alternative ways to get that face time.
Today, many people are familiar with using Zoom (or even just Skype and FaceTime). It’s not as good as in person, but it’s better than nothing. Consider setting an appointment to close the loan. Your FSR can walk the member through the process.
Worst case, if a video call isn’t agreeable to them, you can still resort to that hand-held invention from Alexander Graham Bell.
And now you can have a real conversation on why a VSC matters for them. How you make the offer is critical. You’ll develop scripts that fit your membership, but here’s a starting point:
“As a member of ABC CU, you have various options surrounding this loan. It’s my responsibility to ensure that you know your risks and how these options can reduce or eliminate these risks. Does that make sense to you?”
Once again, it’s much easier to present your products if the member already knows they exist. If not, guide them to your short, engaging content (and include it in your meeting invite). Then gather their pain points and relevant benefits to explain why each may make sense.
Sales Tip: Members are people. People love getting a great deal. They also don’t like paying more. Thus, they’re payment conscious. Adding services means more money, and that’s not welcome. So focus on extending the loan term to keep payments the same.
This can play a critical role in your sales penetration and product retention.
Step 5 – Post Sale, or, Avoiding Buyer’s Remorse
The sale is done once the loan is booked, right? Yes. And no.
Have you ever experienced “buyer’s remorse”? You know the feeling…that purchase which felt so right at the time just doesn’t anymore. It can happen after loan closing, especially if a member notices the effect their VSC policy has on their monthly payment.
Remember, VSC is refundable, so they can change their mind. During the first 30-90 days, they have a free look period to get 100% of their money back. After explaining and selling the VSC, it would be a shame to have them ask for a refund two weeks later.
Avoid this situation by performing a Post Sale. This is a way to avoid buyer’s remorse while also ensuring everything is working as expected.
Reach out to your member a few days after closing, thanking them for doing business with your credit union. Take the opportunity to review their loan, reinforcing the benefits of their great rate and chosen protection products.
A good follow-up also helps build trust and loyalty, setting the stage to capture more wallet share. Yes, this is a perfect time to suggest a full financial review, so you can share other ways to save them money or simplify their banking.
Protecting Members Is A Constant
As Bob Dylan said, times are a’changing. It’s just a matter of degree. COVID-19 accelerated a digital transformation already in progress. Yet your mission of protecting members is constant.
Working within different bounds, you can continue to help members. By following the above steps, your institution can maximize VSC production. In so doing, you reduce member risk, protecting them from negative financial spirals.
Plus, your institution generates increased revenues while decreasing the likelihood of delinquency or repossession.
Watch the Learning Library (or just Subscribe!) for the rest of this series. We will focus on your other protection products in the same way, with one eye on your member and the other on your continued success.
Blogger. Speaker. Part-time Jedi.
Focused on helping your bank or credit union grow in the face of emerging challenges.