Shifting consumer demand, changes in vehicle supply and growing issues of affordability in the new-vehicle market are prompting key players in auto retail to pivot toward used vehicles.
Lenders can find many opportunities to take advantage of this shift to grow their auto portfolios through used-vehicle loan and lease originations, according to TransUnion's Brian Landau.
Partnering with digital startups, engaging with traditional retailers and recognizing opportunity with higher credit tier customers are among the ways lenders can thrive as the market shifts, said Landau, automotive business leader at TransUnion.
Landau last week hosted a webinar, "Opportunities in Used Financing," for American Financial Services Association members.
As banks and credit unions pivot to used vehicles to avoid competition from captive finance companies, they create new sources of revenue and profit for lenders looking to grow faster than the overall vehicle market.
"They avoid direct competition from OEMs and the captives who offer very attractive incentives on new vehicles," Landau said during the event. "It creates a new source of revenue for them."
To grow used-vehicle originations, lenders don't have to look far from traditional sources, Landau said. More used-vehicle business is coming to auto lenders from franchised retailers, particularly those that have invested in used-only operations.
Partnering with digital startups in the financial technology sector can also incrementally grow lenders' used-vehicle portfolios, Landau said. Using digital platforms and partnerships with traditional retailers, startups are sourcing vehicle inventory from individual owners, offering vehicle inspection and reconditioning services, providing no-haggle pricing for consumers and managing delivery and paperwork of vehicles, he said.
"They're removing all those hurdles and adding these services as part of the offering, enticing many consumers to purchase in this new way," Landau said. "For lenders that are looking to enter this space, the opportunity is to partner with some of the more established startups."