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Consumers who moved with a new mortgage or refinanced their existing mortgage are on average two to three times more likely to open an auto loan within the next 12 months, TransUnion says. Photo credit: DAVID PHILLIPS
To gain customers, dealers and auto lenders should cast a wide net. Consumers borrowing in the mortgage space are likely to be shopping for an auto loan, according to a TransUnion study released last week.
Dealers and auto lenders would likely benefit from working with real estate agents and mortgage lenders to attract auto loan borrowers, Charlie Wise, co-author of the study and vice president of TransUnion’s innovative solutions group, told Automotive News.
The study, which focused on consumer behavior after a mortgage, found that consumers who moved with a new mortgage or refinanced their existing mortgage are on average two to three times more likely to open an auto loan within the next 12 months.
In the month leading up to a mortgage origination, however, auto loan originations tend to fall. In the month following the mortgage payoff, auto originations surge 84 percent from the month prior to the origination, TransUnion found.
Ezra Becker, co-author of the study and senior vice president of research and consulting for TransUnion, said the timeline is valuable for lenders seeking credit-active consumers.
“This population is much more likely to respond to new offers, making them an attractive segment that lenders can now identify,” he said in a May 26 statement.
The study shows the value of cross analysis among various types of loans, Becker added. “It illustrates how necessary it is to look across products to get the full picture of consumer credit behavior,” he said.
Opportunity for dealers
For auto dealers, after a consumer refinances or originates a mortgage loan, there’s “a significant pent-up opportunity for people who are very likely to be shopping for auto loans,” Wise told Automotive News.
The average account balance of consumers who have refinanced or moved with a new mortgage is significantly higher than that of the average borrower in the market for an auto loan.
The average borrower’s account balance is between $19,000 and $21,000. For mortgage originators and refinancers, though, the average climbs to around $24,000. These folks have been homeowners for a while and likely have a higher than average income and better ability to manage an auto loan payment, Wise said.
This cross analysis is helpful for auto lenders and dealers because it shows them which consumers will likely be in the car-buying and vehicle-financing market and when.
“A consumer is a complex creature that has all these different things in their wallets,” Wise said. Auto lenders may not necessarily think of looking at mortgage data. It’s new insight for them, he said.
Wise suggests dealers initiate partnerships with mortgage lenders and local realtors so that when they finance a customer or close on a house, they can refer the customer to that dealership.
They could say to a customer, for example: “If you’re in the market, we have a good relationship with X, Y, Z dealership to direct you to,” Wise said.
Doing so, he said, would help dealers get closer to the mortgage market to increase referrals.
Mortgages, auto loan originations linked, study finds
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