Q&A: Inside AAMCO's Loan Program for Customers
For many Americans who live on a modest budget, owning and maintaining a vehicle can often put a strain on their finances. A recent AAA survey showed that 64 million U.S. drivers would not be able to pay for an unexpected vehicle repair without going into debt.
On top of that, average vehicle repair costs in the U.S., including parts and labor rose 2.7 percent in 2016, according to CarMD’s 2017 Vehicle Health Index.
In an effort to nail down potential customers wary about vehicle maintenance expenses, AAMCO partnered with Loan Hero to set up a web- and mobile-based platform that gives customers access to multiple lenders to help cover repair costs beyond their budget.
As a result, credit denials have been reduced by up to 40 percent, meaning a significant increase in average comp store sales for franchisees, and consequently double-digit sales growth for the brand.
Ratchet+Wrench sat down with Brian O'Donnell, AAMCO's senior vice president of franchise sales to learn more about the program.
Many Americans are unaware of how much it costs to maintain a vehicle. What is AAMCO’s strategy for combating this?
Yes, for the majority of Americans living on a modest budget, owning and maintaining a vehicle is putting a strain on their finances. One of the most consistent comments we have heard in the past from AAMCO dealers was wishing they had better financing options to offer their consumers. The challenges they were facing included lost sales, poor customer experience with multiple denials leading to embarrassed consumers, store managers frustrated by the need to process multiple manual applications and risk associated with in-house financing.
To combat that, we made developing a robust consumer financing platform a top strategic priority because we know that increasing approval rates and average approval amounts has the potential to significantly improve long-term profitability for our dealers.
Our goal was to provide a platform that maximizes approval rates, approval amounts and consumer and merchant economics. To meet this goal, we’ve been working hard to pair the right portfolio of lenders with an online financing platform that matches each consumer with a lender that matches their credit quality.
How does AAMCO’s consumer finance program work?
Our goal is for the consumer and merchant experience to be simple and fast. That means one application to access multiple lenders, with instant approvals and fast payment to the franchisee.
With our current online portal, AAMCO customers have the option to apply for a loan for their automotive repair services via their web browser or mobile device. It is a single-application process that gives them access to a variety of lenders.
How long has this online portal been available? What results has it shown?
After a series of pilots and tests, we began a controlled roll-out of our single application/multiple lender consumer finance platform nationally in the spring of 2016. We saw total approved funded credit of $12.6 million and an average approval amount of approximately $2,000.
Having an online portal to offer customers has been a major tool for our customer service managers. Many customers feel more secure using an online system because they do not have to verbally give out their personal information. In addition, our customer service managers no longer have to tell customers that they were not approved by a lender, which has helped decrease negative customer interactions. In the past, staff would have to complete several applications for multiple lenders, and now, they enjoying having a centralized application platform with a multi-lender solution.
Why did you partner with Loan Hero?
The Loan Hero platform covers the entire credit spectrum with a single application that is available through a web browser and on mobile devices. With Loan Hero, we've found the right portfolio of lenders that will allow our customers to receive instant approvals, while providing fast payment to our franchisees.
Do you see this becoming a trend across the industry?
People love their vehicles but continue to struggle with how to pay for unexpected repairs. That is a challenge that is not going to go away, and this industry will need to continue providing solutions that make customers’ lives easier and more convenient. As our world has become more and more digital, it’s also important to recognize that online is the preferred method for doing things. Gone are the days of endless paperwork and processing. The name of the game is speed and simplicity.