How Auto Lenders Can Adopt Loan Products for the Electric Vehicle Buyer

The Rise of Electric Vehicles 

Electric vehicle purchases have been growing incrementally since their introduction in mass markets in 1996, nearly 30 years ago, with major upticks in sales in recent years. Last year, the market share of electric vehicles in the U.S. was 7.6% in 2023, up from 5.9% only a year prior, totaling 2.88 million vehicles on the road in the US. While still lagging behind EV tech leaders (including Europe and China, who expect their vehicle share to reach 25% and 40% respectively by the end of the decade), the National Renewable Energy Laboratory estimates that there will be 33 million—more 10 times as many electric vehicles on the road as we have today—in the US by 2030.  

What accounts for the rising popularity of EVs? Individuals are turning more and more to these energy efficient driving options for a variety of reasons including their: 

• Environmental Benefits: EVs produce significantly lower emissions compared to traditional gasoline-powered vehicles. 

• Cost Savings: Because electricity is cheaper than gasoline and EVs have fewer moving parts, lower costs to operate and maintain make EVs more economical in the long run. 

• Government Incentives: Federal and state incentives, such as tax credits and rebates, make EVs increasingly more affordable and attractive to consumers. 

One of the major drawbacks of past EVs was the cost of battery replacement and limited driving range. However, advancements in battery technology have increased EV range, reduced charging times, and extended battery life, reducing these concerns and attracting new buyers who may have previously been on the fence about the practicality of owning an EV. 

Catering to the Consumer Profile of Electric Vehicle Buyers 

As your financial institution explores methods for reaching out to potential borrowers and developing EV-specific “green loans,” it’s important to first understand your target demographics.  

While even a few years ago electric car owners were predominantly middle-aged, white males who earned more than $100,000 per year, the demographic of EV purchasers is slowly evolving, especially as incentives and the increasing availability of used vehicles makes purchasing an EV more affordable. 

According to the Pew Research Center, EV purchasers (and the EV-curious) are: 

• Common: 38% of adult Americans are interested in purchasing an EV. 

• Younger: About half of individuals aged 18-29 are interested in purchasing an EV, compared to only 42% of individuals aged 30-49, and 33% of individuals aged 50-64. 

• Repeat buyers: 68% of individuals who already own a hybrid or EV are interested in purchasing another. 

• Not usually rural: Urban and suburban drivers are more interested in EVs than rural drivers. 

While EV sales are still propelled by higher-earning individuals, they aren’t necessarily the buyers who will most need to utilize a car loan to purchase a vehicle. That’s why it’s important to be prepared for a surge in lower- and middle-income applicants, who according to the Chicago Fed, often utilize car loans for their vehicle purchase. And, as we mentioned above, one major reason individuals with lower incomes are increasingly buying EVs is that many states (and the federal government) are expanding and amplifying income-based incentives for EV vehicle purchase.  

Because state incentives are always developing and changing, as a lender you’ll need to stay up-to-date on your state’s offerings to better understand the breadth of your potential target demographic. Kelley Blue Book offers this extremely useful and comprehensive list Electric Car Rebates and Incentives by state that can help you understand available incentives and consider ways to work with local programs to help your borrowers find the funding they need to purchase an EV. More on this later. 

First, let’s take a closer look at other common qualities of individuals who are most interested in purchasing EVs. 

Psychographics 

Unlike demographics, which look at age, gender, and income, psychographics focus on why people make certain choices. Knowing a borrower’s attitudes, values, interests, and beliefs can help you tailor your products and marketing to better meet their needs and preferences. A few key psychographics of EV vehicle owners are their

•  Concern for the environment: A strong concern for the environment and a desire to reduce carbon footprints are common traits among EV buyers. 

• Willingness to embrace new technology: These consumers are often early adopters of technology, interested in the latest innovations and comfortable using new tech, especially tech that has positive social benefits. 

• Social responsibility: EV owners may care more about social issues, as well as how their presented identity highlights this important part of their belief system.  

• Adventurousness: EV owners may possess an adventurous attitude that makes them more interested in taking on the challenge of owning a new kind of technology—especially if it fits into other aspects of their adventurous lifestyle. 

• Conspicuous consumption: Some EV owners purchase EVs for status, perceiving them having superior performance to gasoline-powered vehicles. 

Additional Behavioral Factors 

As Ernst & Young Global Limited points out, vehicle buyers can be segmented into 5 different groups based on their interest in EVs. These include EV skeptics, EV reductants, EV persuadables, EV considerers, and EV enthusiasts. While each end of the spectrum has grown in recent year, the percentage of enthusiasts has grown the most. When targeting the individuals more likely to buy an EV—persuadables, considerers, and enthusiasts—consider the following traits

• Eco-Conscious Lifestyle: All of these segments care about the environmental impact of their lifestyle, which extends to their vehicle.  

• Considerations: Budget vs. Performance: While persuadables and considerers are budget-minded and appreciate cost savings, enthusiasts care the most about performance. 

• Educated and Informed: Persuadables and considerers want more guidance on purchasing an EV and its benefits, while enthusiasts are already well-informed. Enthusiasts are also well-educated, with 63% holding at least an undergraduate university degree.  

• Risk Tolerance: Persuadables tend to be more risk averse, and may require more persuasion to increase EV adoption rates. Considerers and enthusiasts are risk takers and risk seekers.  

Automotive Lending Strategies for Electric Vehicles 

A borrower already set on financing an EV can certainly approach your financial institution to apply for a traditional car loan for their purchase. However, targeting EV buyers by developing EV-specific marketing—as well as tailored EV loan products—can not only help drive additional customers to your institution, it may also even convince individuals who are on-the-fence to commit to purchasing an EV.

1. Targeted Advertising Campaigns

Create advertising campaigns that appeal to the values, concerns, and interests of potential EV buyers: 

• Highlight environmental benefits: Since many EV buyers are motivated by environmental concerns, banks can emphasize how financing an EV contributes to environmental sustainability in their advertisements. 

• Promote technological sophistication: Reflecting the tech-savvy nature of EV buyers, ads can focus on how the bank’s loan products are integrated with advanced digital tools for easy application and management processes through digital apps or online services. 

• Align to the EV lifestyle: Marketing can also showcase the lifestyle benefits of EV ownership, such as lower running costs and reduced emissions, aligning with the consumer’s personal values and lifestyle choices. 

• Utilize data-driven insights: Utilize data analytics to understand the preferences and behaviors of EV buyers more deeply and to personalize marketing messages that resonate with them on various platforms, from social media to email campaigns. 

  2. Specialized Loan Products for EVs 

As the Financial Brand explains, “Electric vehicles are becoming a viable factor and a growing source of potential business, not only for the vehicles themselves, but auxiliary necessities such as home charging stations and related installation services.” Consider creating specialized strategies for financing electric cars and their associated costs that reflect the unique nature of EVs. 

• Offer EV-specific loans: Also called “Green Loans,” tailored loans for EVs often feature lower interest rates or longer terms, reflecting the higher upfront costs but lower operating costs and longer lifespan of Evs. 

• Offer charging station loans: Beyond just the loans for the vehicle itself, develop loans for at-home charging stations. For commercial clients, create EV-specific equipment loans for larger-scale charging stations for corporate offices, government buildings, municipalities, and universities. 

• Update your valuation methods: Electric vehicles can have different depreciation rates compared to traditional vehicles. Use available advanced models to predict the residual value of EVs more accurately, which can impact loan-to-value ratios and interest rates and make loans more accessible for some borrowers. 

• Offer loans for used vehicles: Because of the longevity of EV vehicles, consider extending loans for older EVs when you may not consider a similar gas-powered car, potentially expanding your market. Keep in mind, many rebate programs are extended to used vehicles.

3. Partnerships with EV Manufacturers, Dealerships, and Insurance Providers

Not everything you’ll do to promote your EV lending capabilities will be direct to consumer. In fact, forming important partnerships with key commercial players can expand your market segment and facilitate EV purchase (and financing).

• Dealer Partnerships: You may already have a partnership with a local dealer for point-of-sale financing, which could be further specialized for EV vehicle purchases. If you don’t, consider collaborating with EV manufacturers and dealers to offer financing directly onsite. This could include exclusive financial products or promotional rates that are not available elsewhere. 

• Incentive-Based Promotions: Some manufacturers offer rebates and discounts to vehicle buyers. Look into working with manufacturers to include these offers in your financing, as a way to reduce their out-of-pocket costs and attract borrowers. 

• Insurance Products: Offer or partner with providers of new insurance products that cover specific risks associated with EVs, such as battery life and replacement, which can also be included in financing packages.

4. Incorporating Government Incentives

If you’re looking to capture lower- and middle-income buyers and “EV considerers,” leaning in on available government funding can help propel your loan sales.

• Integrate tax credits and rebates upfront: Many dealerships already do this, and if you want to be competitive, it’s an important consideration. Structure loan products to include government or manufacturer rebates and tax credits upfront (reducing loan principal) or as down payments, lowering the barrier to entry for many buyers. 

• Develop educational initiatives: Whether or not you offer incentives upfront, you should provide customers with information on available incentives and how they can benefit from them when purchasing an EV, potentially increasing the attractiveness of EV loans. 

5.  Loyalty and Rewards Programs 

EV financing can be a gateway for new financing customers to become long-term customers. Develop tailored programs and offers that specifically cater to EV buyers: 

• Green Financing Rewards: Implement programs that reward customers for choosing sustainable options, such as a loyalty club membership with “green” perks and benefits. 

• Interest and Fee Discounts: Offer interest discounts for individuals who open a “Green Checking” account with paperless statements and robust mobile services. 

• Insurance Discount: If your financial institution offers insurance policies or partners with a local agency, consider offering a discounted plan specifically for EV vehicles. 

Partner with PrintMail to Fast Track Your Automotive Industry Communications 

As the automotive industry continues to evolve with the rise of electric vehicles, it’s crucial for banks and credit unions who offer auto financing to stay ahead of the curve. Adapting your lending practices is just the first step—effectively communicating these changes to your customers is just as important.  

PrintMail Solutions can help streamline this transition. With our specialized services in printing and mailing, we ensure that your tailored financial products and new loan options reach your audience effectively and efficiently. Whether it’s informative brochures, targeted direct mail campaigns, or customized billing solutions for auto lenders, our expertise supports your institution in engaging with both current and prospective clients.  

Start transforming your communication strategy today and drive the future of automotive lending. Get in touch to learn how we can help you accelerate towards success in the electric vehicle market and subscribe to our blog for more great tips!