Against a backdrop of high interest rates, supply chain issues, changes in the mix between new and used vehicles, increasing regulatory pressures, and general economic uncertainty, there is no question that the auto financing landscape is more competitive than ever.
Additionally, the prized cohort of younger buyers, who have “grown up digital,” leads the way when it comes to the desire for a seamless and transparent car purchase and finance experience. Data from the Deloitte 2021 Global Automotive Consumer Study found that while older consumers still value (or will at least tolerate) an in-person shopping experience, a growing number of younger consumers want a totally virtual buying experience.
The old ways of doing business no longer meet the needs of lenders or their customers, driving the need to evaluate and adopt new approaches to price loans and manage risk, and the technologies that support them.
Many auto finance companies may have attempted to implement risk-based pricing in the past, only to be disappointed in the poor results. These poor outcomes include:
High up-front development costs
Large ongoing expenses for model refreshes
Continuous, costly, and disruptive software updates and maintenance
Unpredictable issues when integrating with existing systems
Today, more agile, composable, and intelligent solutions are helping auto lending companies reimagine internal pricing operations.
Modern pricing solutions, such as those offered by Earnix, eliminate these issues. These proven technologies help lenders evolve their best practices and innovate their operations to better serve demanding modern customers.
As the foundation for these solutions, machine learning (ML) and artificial intelligence (AI) can provide much deeper insights into consumer, market, and competitive data, and significantly improve pricing models and outcomes.
Greater personalization and quicker turnaround time
Even with large data sets, AI and ML make it possible to identify patterns and apply judgment to decision-making, leading to greater personalization and quicker turnaround time, both of which are critical to the customer experience (CX). Customers and prospects feel offers are crafted just for them, while the auto finance company avoids the costs and risks inherent in traditional pricing and decisioning approaches.
Powerful automation for dynamic decisioning
Modern pricing software is also designed to integrate tightly with existing systems, adding the layer of intelligence auto lenders need to create fully connected systems. They also provide powerful automation, advanced analytics, and autonomous monitoring. By combining these best-in-class pricing technologies with dynamic decisioning capabilities, auto finance companies can easily scale experiences, reduce their time to market, and continuously innovate their offerings.
The most effective solutions also help financial services firms meet stringent governance and compliance requirements, thanks to built-in reporting that provides a complete audit trail detailing every action.
Faster time to market
Unlike in-house-developed or on-premise systems, modern, SaaS-based systems can also be implemented extremely quickly to provide fast time to value and return on investment (ROI), with many implementations completed in mere weeks, rather than the months or even years required by traditional approaches.
The speed advantages apply not only to the implementation process, but also to optimizing everyday operations. Auto finance companies can develop and change pricing models in mere minutes, which means that they can often deliver highly compelling offers in real time.
Examples of the benefits of digitization and upgrading the pricing process are many and compelling. Accenture has described how a global bank reinvented its entire auto loans process, digitally transforming its automotive and consumer loans businesses.
The result was a stunning 50% increase in car loan sales, a double-digit drop in total costs, and a jump to the #1 spot in market share (up from its previous position as #4 in its market).
As Bain and Company put it, “Smarter pricing helps to optimize yields, manage the cost of funding, gain market share, do right by the customer, and manage risks.”
If you’re a lender looking for a “leg up” on the competition, and for a way to provide the best possible experience for your prospects and customers, now is the time to implement new technology and automotive lending solutions.
For a more complete discussion of the industry-leading pricing technologies available from Earnix today, please be sure to download our eBook on the topic.