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Driving Car Loan Volume And Gaining A Competitive Advantage In A Rapidly Changing Environment: A Captive Lender Perspective

Will Ely

August 8, 2022

  • Pricing
  • Customer Centricity

The traditional Captive OEM business model is being challenged by several disruptive forces simultaneously, including changes in customer preferences towards personalized, all-digital car buying experience and digitally savvy competitors who bypass the dealer networks and approach customers directly.  These trends result in a market share erosion for Captives, sliding profitability, and greater risk exposure in today’s volatile economy. 

For example, in Q1 2022 the U.S. Auto Finance market saw the biggest growth in vehicles financed by credit unions in the past five years – jumping from 18.55% to 22.06%, while Captives’ share dropped 4% in the same time period, according to the Experian “State of the Automotive Finance Market Q1 2022” Report. 

Sadly, these trends are not limited to the U.S. market. To retain market share and profitability, Captives worldwide must react with unprecedented speed to an increasingly complex array of challenges. Likewise, management and regulators demand precise performance forecasts in order to manage risk tolerances and meet profitability goals.  

Global financial markets are experiencing volatile and rapidly rising rates, and the quickly-diversifying field of auto lenders are responding with a broad variety of tactics.  

Keys To Success 

One of the success indicators for an auto lender is agility. An effective lending strategy calls for analytical technology that allows for speed and precision when it comes to price changes in response to competitor movement, treasury rates or consumer demands. It is also critical to understand exactly how those price changes will impact short and long-term KPIs.  

Many indirect lenders, highly sensitive to bottom-line margin, are deploying complex analytical capabilities to stay on top of changes using near-daily updates of sophisticated pricing structures. Others are shifting their technological firepower towards direct-to-consumer lending platforms, appealing to digital-first consumer preference and dramatically reducing lending overhead. And then there are the FinTechs, entering the market unburdened by legacy systems with fresh ideas, bleeding-edge technology and analytics-forward leadership. 

Maintaining market share requires a thorough understanding of the complex interplay of technology, markets, competitors, and consumer behavior. Agility is no longer a “nice-to-have” for Captives. If Captives want to respond before the next shift, they must be able to perform these analyses and deploy updated pricing strategies in a matter of minutes, rather than days or weeks. That is why many Captives have been eyeing opportunities to use innovative digital platforms and tools to serve customers’ broader financial needs, according to Deloitte’s 2021 “Digital by Design” report. 


From the customer perspective, “seamless digital service that combines shopping for a vehicle, buying one, and financing it into a single experience is no longer a nice-to-have novelty, but a foundational necessity. Captives can no longer take it for granted that consumers want them to deliver those advantages in person, or even over the phone. Nurturing and managing customer relationships digitally requires not only new tools and channels, but a new ability to span geographies on a 24/7 basis,” – states Deloitte in their “Digital by Design” report. 

Next Steps For Captives 

While dynamic pricing is nothing new in the auto lending market, the use of AI-based predictive pricing analytics is capable of addressing a wide array of today’s challenges experienced by the captive industry. What can a good pricing engine deliver for you? 

  1. A significant increase in car sales and car loan volume through personalized offers in real-time and all-digital loan approval experience that consumers demand.  With minimized rehashing and automated processes consumers will be less likely to drop off before completing a sale at a dealer. 

  2. Unprecedented agility: you will be fully prepared for changing market conditions, interest rate ups and downs, changes in vehicle demand, consumer behaviour shifts and general market volatility.

  3. Digital decisioning in real-time with “what-if” scenario capabilities: Earnix allows lenders to combine AI-driven scenario analysis and pricing science with real-time deployment capabilities. Whether your goal is total volume, geographic market share or risk exposure, Earnix can calculate a strategy to achieve that goal. And when their goals change, Earnix users can pivot instantly – updating yield curves and competitor data, recalculating sophisticated pricing strategies and deploying to the market before the competition can even schedule a meeting between their data scientists and the pricing team. 


Learn more about what Earnix can do for you: approve loans quicker, increase sales volume and customer satisfaction with dynamic pricing engine.

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Will Ely