How to drive growth with instant auto loan disbursements

Between 15 and 20 million new cars and trucks are purchased each year in the United States, and 80% of these sales are financed, according to the National Automobile Dealers Association. With the FedNow® Service, your credit union can offer instant auto loan disbursements—even on nights and weekends—allowing you to attract and retain members, better serve auto dealerships you may partner with, and generate new loan opportunities for your own organization.  

The benefits your credit union can deliver with instant loan disbursements can help position your organization as a preferred lending partner and lead to more referrals and deeper banking relationships.

A seamless experience for buyers 

When you provide loan disbursements instantly to an auto buyer, you can deliver powerful benefits that come from a fast, frictionless financing experience. Buyers can purchase a vehicle feeling confident that the payment will arrive in seconds, allowing them to drive their new automobile off the lot without delays that may arise with other payment methods. Plus, with instant auto loans, buyers don’t need to bring a check or other payment method with them to the dealership—the process is fast and convenient.   

Better cash flow management for auto dealers 

Auto dealerships also benefit from getting paid via instant payments. Because money is cleared and settled immediately, and the funds are accessible right away, dealerships gain more control over cash flow and reduce the risk of an asset leaving the lot before a transaction is complete. Additionally, if the auto dealership is able to send instant payments via their own financial institution, it can precisely time repayment of capital loans and transfer funds immediately, enabling faster acquisition of new inventory.

New opportunities for credit unions

The seamless, efficient experience your credit union can provide with instant auto loans can boost member satisfaction and help you retain and attract members. And because you’re meeting a demand with a preferred and innovative solution, you can also improve cross-selling opportunities and deliver a positive impact on deposits.  

Additionally, you can generate new loan opportunities for your organization. For example, if the terms of a loan are the same, an individual buying a car on the weekend may be incentivized to choose your credit union if you offer immediate loan proceeds versus another institution that requires a payment be made during regular business hours. If this resulted in four new loans per month, here’s a look at what that might look like: 

• Average auto loan amount: $33,506
• Average loan term: 68 months
• Interest rate (assumed): 4.5%
• Estimated annual revenue from interest: $30,273 

(Based on Lending Tree Auto Loan Statistics)

Beyond auto purchase financing

Loan disbursements are just one use case for instant payments when it comes to the auto industry. Additionally, related use cases your credit union can enable include:  

• Down payments or cash sales: Buyers can transfer money immediately from their personal account to the dealership. 
• Consumer auto loan repayments: Buyers can make monthly loan repayments instantly, eliminating the use of paper checks and gaining the ability to precisely time payments. 
• Floorplan loan repayments: Auto dealerships can use instant payments to repay capital loans, allowing them to acquire new inventory more quickly. 
• Auto parts purchases: Auto dealerships can pay suppliers for parts needed for maintenance and repairs with instant payments. 
• Person-to-person auto purchases: Someone buying a used car directly from a private individual can transfer funds instantly to the seller.

Learn more  

For credit unions, instant auto loans represent more than a technology upgrade. They're an opportunity to deepen relationships with members in your market. By offering this convenient, modern service, credit unions can deliver an exceptional, in-demand service and stay competitive in an ever-changing market.  

Ready to explore instant auto loans for your credit union? Check out our latest resource to learn more about instant payments, including examples of how the process can work, and best next steps. Visit FedNowExplorer.org or contact your Federal Reserve Financial Services relationship manager to learn more.

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