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Financing plays a role in the vast majority of new-vehicle sales in the US, yet many buyers have been locked out of the market since the 2008 financial crash. In 2014, the financing industry is poised to ease lending to “nonprime borrowers”—those with a FICO score between 620 and 680—creating a potential vein of growth for the recovering auto industry, according to a new eMarketer report, “2014 Auto Financing Outlook: Digital and Traditional Channels for Tapping Into Younger, ‘Nonprime’ Borrowers.”
While winning business from these lower-quality borrowers could help brands achieve an exceptional year of growth, it’s important to note that this is a niche group, mainly consisting of buyers who would be new to a brand—or perhaps to even owning a vehicle. They are likely to be younger and less affluent than the average new-car buyer and are looking to take on longer loan terms to decrease monthly payments.
Financing deals are most often struck on the dealer lot, so while national and regional brand support is useful, especially for leasing offers, marketers at the local dealer level are best positioned to capitalize on the opportunity presented by this windfall of new buyers.
Much of this opportunity lies in new tactics, specifically mobile and digital video, which have been revolutionized since the last time middle-tier borrowers were buying at 2014 levels.
At the start of the purchase path, mobile, tablet and video ads each laid claim to prompting 34% of buyers to start researching vehicles, according to a May 2013 survey from Google, Millward Brown Digital and Polk.
From there, video continues to prove itself as an influential part of automotive marketing. Among other measures, auto led all global industries in terms of video completions of mobile banner ads in 2013, according to DG MediaMind (recently rebranded to Sizmek).
The “captive” financiers, or the in-house financing wings of the automakers, should also take note of investments in mobile, social and video, the top marketing priorities for the larger financial industry, according to a 2013 Martini Media survey. While automakers generally have their pick of who they want to finance—often capturing large profits for the parent company—J.D. Power and Associates found auto shoppers were using digital research nearly twice as often to choose their lender, from 6% in 2008 to 11% in 2013.
Perhaps most compelling is data showing behavior on dealer lots. In a December 2013 study from FordDirect and Research Now, 81% of auto shoppers used smartphones to do research, including 25% of shoppers who did so exclusively via smartphone. Once on the lot, 63% of shoppers used a smartphone.
The full report, “2014 Auto Financing Outlook: Digital and Traditional Channels for Tapping Into Younger, ‘Nonprime’ Borrowers,” also answers these key questions:
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