MADISON, Wis. (5/17/13)--Auto loan loyalty stems from more "high touch" factors, such as good member service, ease of contacting the lender and lender responsiveness, than from quantifiable factors, such as interest rates and down payment requirements, according to a new report from the Filene Research Institute.
Credit unions' relationship strengths play a large role in auto loan selection, while their historical pricing strength (at least in aggregate) seems to be less important, said the paper, "Predicting Members' Choice of Auto Lender: Borrowing from Credit Unions or Elsewhere?"
Members placing more importance on service were far more likely (by 41%) to choose a credit union for their auto loan. Similar increases in credit union share were found for ease of contacting the lender (40%) and lender responsiveness (38%).
Most members report being greatly satisfied with their credit union and being committed to credit unions in general. However, questions about those topics are not useful predictors of members' choice of an auto lender, the report said.
For instance, members who rate highly their credit union's prompt resolution of problems are only moderately more likely (by 13%) to choose credit unions for their auto loans. Members who report that they specifically seek out credit unions to serve their financial needs are barely more likely (by 5%) to choose credit unions for their auto loans than more "casual" members.
The research did not find a clear correlation between preferred communication channels and choosing a credit union for an auto loan. However, it did reveal a member preference for electronic information. The credit union website is the most preferred communication channel, followed by e-mail and then by credit union employees. The least preferred are branch brochures, and signage and social media.
"In short, credit unions should care about price, but not too much," the report said. "They should double down on electronic communication methods to advertise and originate loans. And they should remember that auto loan-loyalty stems from good member service and ease of contacting the credit union. Nurture those, and you'll do well."