Get Back On The Highway

Credit unions can use strategic messaging to get on the front lines of the auto turnaround.

 

By CU Direct

 

Auto sales continue to climb after the roller coaster ride of the last few years, and that’s good news for credit unions, many of whom are finding new ways to grow both loans and membership.

The effects of the recession, of course, are news to no one. By the end of 2008, both General Motors and Chrysler were losing billions of dollars each month, and throughout 2009 and 2010, the largest manufacturing industry in the country was struggling.

Bouncing Back

Now, less than four years later, it’s a very different picture. The U.S. auto industry is not only back on the highway, but analysts are projecting that new and used car sales will continue to grow at a strong pace throughout 2012.

In the first seven months of the year, new vehicle sales are up 14% while used auto sales are up 4%. Combined new and used vehicle sales have risen 6% on a year-to-date basis. The seasonally adjusted annualized rate of sales (SAAR) is above 14 million units, a level not seen since August 2009 when the government’s Cash for Clunkers program helped boost sales.

“We’re awash in a surge of new vehicle sales ever since last summer,” says David Brand, director of originations at Hudson Valley Credit Union ($3.7B, Poughkeepsie, NY). “We’re focused on riding the wave.”

Andrew Coy, director of credit services for Pennsylvania State Employees Credit Union ($4B, Harrisburg, PA) notes that PSECU has also experienced positive growth for the past twelve months.

“Our 2011, auto loans were 32% higher than in 2010,” he says. “We’re anticipating continued positive growth for sales of both new and used vehicles, so we look to support this upswing for our indirect dealers.”

One result of the economic recovery is that many credit unions have revised spending guidelines.

“Last April, we got more aggressive with pre-approvals,” Brand says. “We’ve also instituted a program of pre-approved auto capture, which means that we approach members who previously bought vehicles and offer to save them money. This works because it’s not the interest rate that most members pay attention to, but rather the monthly payment.”

In some cases, an individual’s credit rating had improved and in some cases members were stuck paying higher interest rates on purchases they made when the economy was worse, he says.

Patty Lewis, vice president of lending for  Greater Nevada Credit Union notes that her institution is taking a similar approach.

“It’s been tough, but things are looking much better. We have cash and we’re ready to lend. In fact, we’ve revised our lending guidelines and those new guidelines just went into effect on April first.”

Traditional Tools Are Back – Sometimes With A Twist

The traditional mediums of television, newspaper, radio, and billboard advertising are back in force, and some credit unions are using those tools to reposition their offerings with respect to the increasingly healthy economy.

Lewis says that Greater Nevada has had a great deal of success with a current ad campaign themed to the economic recovery.

“We’ve been building our ads around an extremely dour-looking doctor who advises that he can help cure ‘Embarrassed Car Syndrome,’” she says. “It’s sparked a lot of positive word-of-mouth precisely because we took a humorous approach.”

Digital Credit Union ($4.4B, Marlborough, Massachusetts) has also fine tuned its outreach, says Diane Richard, vice president of lending.

“We’ve ramped up our television and radio advertising and we’ve found that a significant part of our loan growth has been our Second Chance loan promotions,” she says. “Our themes include the phrase ‘What can DCU save you?’ because we offer members lower rates, lower fees and, in many cases, lower monthly payments.”

An educational approach also works well for the credit union because many people don’t understand it’s possible to refinance their own car loan.

“By explaining the options, we’ve been able to save members literally hundreds of dollars each month,” Richard says.

Social Media Steps Up

Some credit unions are also finding innovative ways of using social media to spur their continued growth.

Richard explains that the most successful component of Digital’s marketing effort has been the credit union’s Facebook page and the resulting word-of-mouth it has generated.

“Members can rate our loan products and it’s become an important education and research tool for members,” she says. “Plus we find that members use it across generations, so it provides a very broad-based outreach.”

Hudson Valley also uses Facebook as well as Twitter to make its announcements. The credit union even created a small advisory group through its Facebook page and each week  it emails a single question to the group for feedback.

What Lies Ahead?

When asked about further growth in the future, each of these credit unions is upbeat in its assessment.

“Our goals for this year is to grow sales by 20%. If we meet that, 2012 will be our best year yet,” Brand says. “We’re not only on track to meet that goal, but we’re actually a little bit ahead at this time.”

Greater Nevada’s consumer loan volume has been increasing and the credit union is projecting that it will reach $60 million by the end of this year.  Digital’s goal for this year is 8% overall loan growth, and it expects auto lending to top that.

Likewise, Pennsylvania State Employees advises that last year’s auto loan decisions were the best in its history.

“That’s now a base for us, and we’re definitely on track to increase our numbers,” Coy says.

By the end of 2011,  annual credit union retail auto loan market share had rebounded from a 15.2% low in March and stood at 16.9%, equal to the 2007 pre-recession level. With CU market share currently standing at 17.3% and more than 1,000 credit unions aggregated on the CUDL auto lending platform experiencing 31% loan growth, there is ample evidence that these positive auto trends will continue in 2012.

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This is an updated excerpt from an article that originally appeared in the Spring/Summer issue of CU Direct’s Credit Union Lending magazine.

Bill Meyer is the Public Relations and Corporate Communications Lead for CU Direct Corporation and the company’s CUDL, Lending Insights, Lending 360, CUDL Retail, and Vero brands. He can be reached at bill.meyer@cudirect.com.

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Aug. 20, 2012


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