To say that the auto loan industry is in crisis would be an understatement.
Rising interest rates and sky high car notes have made it increasingly difficult for consumers to make on-time auto loan payments. This, in turn, has created a challenging environment for automakers and lenders, who now must find a way to collect debts efficiently while still maintaining consumer trust.
As is often the case, this undeniably complex problem has a rather simple solution: text messaging. This blog explores 5 ways texting improves the auto loan experience. Read on to learn more.
The Auto Loan Crisis
Before we jump into the solution, it’s important to understand the problem.
Consumers looking to finance a new or used vehicle are met with a sometimes-insurmountable barrier to entry. Intent on fighting inflation, The Fed continues to raise the benchmark interest rate, which in turn drives auto loan rates up higher. Now, the average interest rate on a new car is up to 8.95%, and the average rate for a used car is 11.3%. Because of this, many consumers struggle to get credit at all. And for those who do? The journey doesn’t get much easier, as the average American pays $765 per month on their car note.
In addition to this, Americans are still facing the repercussions of the chip shortage of 2021 and 2022. The shortage led to compounded supply chain issues, which resulted in severely inflated prices for used vehicles. Then, at the end of 2022, used vehicle prices dropped suddenly, leaving millions of car owners underwater. Negative equity plus high interest rates plus the rising cost of living meant that many people were unable to keep up with their auto loan payments.
All of this has led to an affordability crisis in the auto loan industry. Auto loan delinquencies average 1.85% across all age groups, up 16% from 2021. The nationwide auto loan debt has risen to $1.5 trillion, up from $1.46 trillion in 2021. With more and more buyers missing payments and many people steering clear of buying cars altogether, the auto loan industry now faces the dual challenges of regaining and maintaining buyer allegiance while also resolving delinquencies and collecting debts.
As the costs of handling loan delinquency are on the rise, lenders are looking for a way to communicate with borrowers who are behind on payments in a cost and time efficient manner. They’re after a streamlined loan origination process and a way to facilitate on-time payments with ease of use for consumers.
Enter: text messaging.
Here are 5 ways texting improves the auto loan experience:
1. Texting builds trust and facilitates easy communication.
You know what they say: open communication builds trust. This isn’t only true for interpersonal relationships; it’s also true for business.
Texting removes communication barriers by opening a direct line of engagement between lenders and consumers. It levels the playing field by allowing lenders to meet consumers where they are: on their phones. Research shows that more than half of consumers prefer texting with a customer support agent to talking on the phone, and 97% of Americans use their texting application at least once per day.
SBT’s Two-Way Texting allows lenders to have direct conversations with consumers so that both parties get their questions answered and their needs met easily and efficiently. Additionally, our Dedicated Short Code builds trust between lenders and consumers, as these shortened phone numbers are vetted and verified with access limited to the people who need it. This, in turn, increases conversational consistency and reduces lag time that could jeopardize the customer relationship.
2. Texting simplifies the loan origination process.
Transferring documents can be a hassle for even the most tech-savvy consumers. People are much more inclined to submit identification and verification assets when they can do so easily, without scanning or faxing, and when they know for sure that they are sending through a secure system.
Our Inbound MMS capability streamlines the loan origination and collection process by allowing consumers to submit important documents through a secure text message channel. This makes it as easy as possible for borrowers to transfer important files, and promotes operational efficiency for lenders.
3. Texting streamlines the loan payment process.
We’ve all been there: We get an email notification that a bill is due, only to click on the provided link which leads to a myriad of follow-up steps that we’re either too busy or too confused to complete.
When multi-step payment processes are simplified and run through a more efficient channel (like texting), borrowers are able to pay off debts without the unnecessary headache.
SBT’s FinText Payments is a 3-click process that enables consumers to make loan payments via text message. This process is streamlined even further by SmartURLs, which are shortened, trackable, secure links through which consumers can enter their payment details.
4. Texting promotes on-time loan payments.
The proof is in the numbers: 85% of all consumers prefer receiving texts over calls and emails, and text messages have a 98% open rate (while emails average only 20%). With these stats in mind, it’s clear that texting in the superior channel to remind consumers of upcoming payment due dates.
Automated Payment Reminders encourage on-time auto loan payments by reminding users through text, at the frequency of their choice, when a payment is due. This feature can be seamlessly integrated with our Two-Way Texting capability, so that a consumer who is unable to make a payment by the deadline or who has questions about their payment can be easily transferred to a customer service agent without ever leaving their texting app.
5. Texting puts lenders on the consumer’s side.
The lender-borrower relationship is often thought to be antagonistic, but it doesn’t have to be. Leveraging services like Two-Way Texting and Automated Payment Reminders can help lenders form more meaningful relationships with the consumers they serve.
Take it from our client, SAFCO. Referring to our Two-Way Texting service, Collections Operations Supervisor Jamal Turner had this to say:
“I had never utilized text in a collections operation. I was blown away by how responsive customers have been. Text is instant. Customers are communicating with us in real time. We are seeing a big improvement in our servicing capabilities … Especially in a repo situation, time is of the essence, and two-way text can help a customer remain current to avoid repossession.”
Text-messaging can make all the difference in the auto loan experience for both consumers and lenders. When you partner with Solutions By Text, you get access to our suite of services that streamline communication and debt collection, all while remaining compliant.
Ready to improve your auto loan experience? Contact us today.
