Trends in Auto Purchasing

Transcription

1 Trends in Auto Purchasing Ben Klepzig May 8, 2015 LLAA,LLSP CUNA Mutual Group Proprietary Reproduction, Adaptation or Distribution Prohibited 2015 CUNA Mutual Group, All Rights Reserved.

2 Overview Auto Purchasing Trends Specific to Credit Unions Specific to Industry Behavioral Based The Age of Disruption Characteristics and Recognition Marketplace Lending Following the Mobile Mind-Shift Optimizing Opportunities Considerations for the Credit Union 2

3 The full 2014 year finished up 5.9% from 2013 to million vehicles sold, according to Autodata. A B C D million million million million 5 things we learned from Dec. and 2014 auto sales, USA Today, January,

4 IHS Automotive predicts U.S. auto sales to reach million in A B C D 15.7 million 16.2 million 16.9 million 17.1 million 1 Global Auto Sales to Hit 88.6 Million in 2015, Auto Blog, 2/3/15; 4

5 According to Experian, the average monthly payment for a new car auto loan in 2014 was. A B C D $389 $405 $352 $471 Source: Americans Borrowing Record Amount to Buy Cars, March 2014; 5

6 Auto Purchasing Trends Specific to Credit Unions 6

7 Credit Union Loans On the Rise Used Auto Loan Growth is up 12.1% for all Credit Unions % of total loan 1 market share is held 2 by credit unions 1 Auto Loan Growth from the Inside Out, Callahan and Associates, Groove Car Inc., Auto Loan Growth from the Inside Out, GrooveCar Inc., Experian State of the Auto Finance Market,

8 Summary of Lending Trends For all of 2014, loan balances rose 10.2% up from 7.3% to 2013 For all of 2014, credit union new auto loan balances rose 20.7%, the fastest pace since August Used auto loan balances also reported a strong year, rising 12.1%. Auto loans now make up 32.4% of the CU loan portfolio. Credit Union Trends Report, CUNA Mutual Group, Feb 2015 (Dec 2014 data) 8

9 Credit Unions Offer A Great Deal For Consumers Credit unions provide: 47% lower interest rates for new car loans 49% lower interest rates for used car loans than traditional banks 2013 Auto loan and lease report, Sonia Garrison, Wallet Hub, 2014, 9

10 Auto Purchasing Trends Specific to Industry 10

11 Consumer Buying High Level 70 Automotive Sales (in millions) Used Cars New Cars Source: CNW Research, Edmunds.com, March

12 2014 Automotive Highlights Average transaction price (what people actually paid) rose yet again in December to $34,596* Hottest vehicles for 2014 were compact and midsize SUVs* Average window-sticker mileage rate up 5 mpg since October 2007* Toyota brand again outsold Chevrolet to remain the No. 2 brand, behind the Ford brand.** *5 things we learned from Dec. and 2014 auto sales, USA Today, January, **Who won 2014 s best auto fistfights?, USA Today, January 6,

13 Lending Trends Show Dynamic Shifts More new-car buyers are opting for long loans: A record 33.1% of loans at 72 months or longer, with 84 months or longer at 3% 1 More cash-strapped buyers getting lower payments by leasing, which hit a record at 26.5% of new-car transactions in February More car loans exceed 6 years as prices rev, Chris Woodyard, USA Today, 3/12/14, 13

14 Negative Equity Rising 27% of New Car Buyers in 2014 had Trade-in with Negative Equity Source: 27% of Car Buyers Trade-In Underwater Cars, Feb. 2015; 14

15 Sub-Prime Lending a Factor Again Sub-prime customers took out $129.5 billion in auto loans in the first eleven months of 2014, over 1 ¼ of total auto sales. 1 Source: The Next Subprime Crisis Will Ride on Four Wheels, 2/26/15 15

16 Sub-Prime Lending a Factor Again Cont. Total Sub-prime Auto Loan Securitizations 1 Taking On More Risk: Deals made up of auto loans to borrowers whom creditors deem riskier have increased since Investment Riches Built on Subprime Auto Loans, New York Times, 1/26/15 16

17 Auto Loan Balances Reach All-Time Record in 2014 In 2014, U.S. consumers carried the largest amount of auto loan balances ever at $886 billion. Source: Auto Loan Balances Reach $886B, 2/19/15, Credit Union Times 17

18 Auto Purchasing Trends Behavioral Based 18

19 The Auto Purchase Journey INTEREST AWARENESS BRAND LOYALISTS CONSIDERATION PURCHASE 19

20 Car Buying Services Type of Auto Buying Services Offered by CUs 13% Online Portal 13% 40% Auto Broker None, with no plans to implement In House Consultant 27% 7% None, with plans to implement Source: Online Car Buying Services, Green Profit Solutions, Inc., Jan

21 Competition Auto Dealers Insurance Companies Retail Outlets 21

22 Collaborative Consumption Collaborative Consumption: Uber, Community Car, Lyft and others offer auto-sharing programs, potentially reducing auto loans by 10% Millennials seem to place less importance on car ownership than previous generations do. They are more open to sharing cars and to the growing number of mobility services 1 Five Subprime Auto Finance Predictions, Arjan Schutte, Forbes, 10/21/13, 22

23 The Auto Purchase Journey - Subconscious cues - Passive engagement - Chance exposure/experience INTEREST - Online consumer research - Social media/ influence of personal network AWARENESS BRAND LOYALISTS CONSIDERATION - Financing - Billing - Follow-up experience - Customized marketing - Refinancing PURCHASE - Online and offline - Customer service - Competing offers 23

24 Online Research Replaces Dealership Visits Buying Process is Changing Remarkably 68% of car buyers visited only two dealerships or fewer before buying 40% visiting only one dealer 1 in 6 skip test drive altogether 1 1 in 6 Car Buyers Skip Test Drive, Dealer Marketing, 4/15/14 24

25 The Age of Disruption 25

26 The Age of Disruption Non- Automotive Disruptors Apple Pay Amazon Prime Automotive Industry Disruptors Uber Intermediaries Tesla Non-traditional Financing 26

27 Digital Competitors are Unbundling 27

28 Incumbents Challenge It is not the owner of stage-coaches who builds railways. Joseph Schumpeter 28

29 Successful Disruption: Smartphones Source: BDU Analysis 29

30 Successful Disruption: GPS Devices 2004 Garmin StreetPilot TomTom iphone Navigation App 2014 Google Maps App Cost: $1,516 Cost: $100 Cost: Free Source: BDU Analysis 30

31 TomTom Annual Revenue ( Billions) Successful Disruption: GPS Devices Apple Net Sales ($ Billions) GPS Device Manufacturers Struggle; Smartphone Sales Grow TomTom International BV Apple iphone Source: TomTom International BV and Apple Inc. financial reports 31

32 Successful Disruption: Uber Source: Clarifying Prices When You Hail a Cab with Uber, Other Apps, WNYC.org, 1/10/

33 Uber Flattens The Competition Source: Uber/Lyft vs. taxis: Let the market decide, not taxi cartels and their government enablers bureaucrats and legislators, Carpe Diem Blog, 7/12/

34 Characteristics Of Successful Disruption All-new technology or business model innovation Provides better value than existing product/service offered by industry incumbent Value Benefits Cost Adoption extends beyond early adopters into mainstream consumer segments Incumbents response is hampered by legacy cost structures, infrastructure and regulations Incumbent decline can be rapid and terminal 34

35 Themes In Retail Financial Services Disruption Disruptors seek to: Use technology-driven business models, e.g., platform strategies Have a lower cost structure Find ways to bypass relevant laws and regulations Utilize low cost ways of moving money Aggregate customer data and monetize it Enter a single financial service before moving to other categories 35

36 Lending Club Quarterly Loan Issuance Lending Club facilitated over $1.4 billion in new loans in Q M 1400M 1200M 1000M 800M 600M 400M 200M 0 Q Q Q Q Q Q Q Q Q Q Q Q Source: Lending Club Statistics, 3/16/2015; 36

37 Marketplace (P2P) Lending Lending Club facilitated nearly $3.0 billion worth of loans during the first three quarters of 2014, exceeding the 2013 full-year number of $2.06 billion. Prosper originated approximately $1.3 billion in loans through Q3 of 2014, compared to roughly $357 million in With conservative metrics, marketplace lending is predicted to grow to a $114 billion industry. Source: Marketplace (P2P) Lending: 2014 Year in Review, Feb

38 Dealer/Buyer Power Shift - TrueCar Your Guaranteed Savings Certificate In-Stock Vehicle Best Car-Buying Websites, Fox News; June

39 Dealer/Buyer Power Shift Edmunds.com Get the post-haggle price. Save thousands without haggling. That s Edmund Price Promise. Select Make Select Model Select Model GO e.g. Mazda e.g. Mazda CX-5 Best Car-Buying Websites, Fox News; June

40 Dealer/Buyer Power Shift - Costco COSTCO AUTO PROGRAM New & Select Pre-Owned Vehicles Motorcycles & Powersports RVs Shopping for a new ride? Enter ZIP Code: GET STARTED CostCo Auto Program; May

41 Following the Mobile Mind-Shift 41

42 Following The Mobile Mind-Shift Use of Mobile Banking Applications by Age: 63% of Millennials, aged % aged % aged 50 or older 2 Access to Financial Services is Changing Smartphones are changing the way credit union members conduct their financial business: 68% OF CREDIT UNION MEMBERS WHO USE MOBILE BANKING, DO SO MORE THAN 1 1x PER WEEK. 1 Mobile as a Movement; 2/26/15; Credit Union Times 2 Happy Bankers, Mobile Bankers; 9/17/14; The Financial Brand 42

43 Growth in Mobile As of September of 2014, 71% of the 1 US population own a smartphone. CUNA Mutual Group forecasts that approximately 40% of loan transactions on loanliner.com will come through a 2 mobile device. 1 Mobile Millennials, Nielsen Data, September CUNA Mutual Group Internal Report, March

44 Optimizing Opportunities RESPONSIVE DESIGN CHANNEL MAXIMIZATION ANALYTICS WE MUST TAKE ADVANTAGE OF THESE OPPORTUNITIES AND CHALLENGE CURRENT BUSINESS PRACTICES. 44

45 Considerations THIS IS THE WEB THIS IS THE WEB THIS IS THE WEB THIS IS THE WEB THIS IS NOT THE WEB. THIS IS THE WEB THIS IS THE WEB THIS IS THE WEB THIS IS THE WEB THIS IS THE WEB THIS IS THE WEB 45

46 Maximizing Mobile Channel Opportunities Mobile channel opportunities go far beyond smartphones and also include: Online Loans for January 2015 Tablets Hybrid devices (all the same OS) Others: Smart TVS, Video game consoles, Slingbox, and Apple TV Desktops Phone Tablet Other (E-reader, Game Consoles, Unknown) CUNA Mutual Group, Internal Reports, Nov to Jan

47 Optimization Leads to Extraordinary Opportunity As of February 2015, 28% of all loan applications come through mobile devices. This is more than 4x the volume since the launch in The median age of a smartphone loan applicant as of January 2015 is 33, while the average age for a PC applicant is % of members indicate they are interested in additional loan products such as Credit Life/Credit Disability when they apply from loanliner.com and Smartphone Loans. CUNA Mutual Group, Internal Reports, 2015 data 47

48 Digitally Connected Customer Journey INTEREST AWARENESS BRAND LOYALISTS CONSIDERATION PURCHASE 48

49 Channel Considerations for the Credit Union Be prepared for the long haul Don t forget about operations, tech support, staff education and awareness Yes, there is expense associated with mobile, but it can help generate revenue too Seek out and leverage data and analytics 49

50 Takeaways AUTO PURCHASING ACTIVITY IS HIGH DISRUPTERS ARE HERE, MORE COMING RESPONSIVENESS IS THE NEW MOBILE 50

51 Thank You! Ben Klepzig Sr. Marketing Manager CUNA Mutual Group , ext

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