Is Your Credit Union Driving Auto Lending?

Enticing rebates are being offered, the automakers' newest models are in the lot and the first wave of income-tax refunds have hit the mail all in time to help the U.S. auto industry kick off the spring selling season. And consumers are once again primed to buy.

 

By Cheryl Grandolfo

 

Enticing rebates are being offered, the automakers' newest models are in the lot and the first wave of income-tax refunds have hit the mail all in time to help the U.S. auto industry kick off the spring selling season. And consumers are once again primed to buy.

So far this year, unprecedented sales of SUVs and luxury vehicles are leading the way, and anyone in the long line of touch points with this process is sure to be fueling the momentum.

"About 1,300 of the nation's 9,500 credit unions engage in indirect lending, enabling their members to apply for financing with the credit union at a dealership...Most credit unions that do indirect lending have a list of dealerships they recommend to their members. In return, those dealerships provide loans to those members at the credit union's interest rate, without a markup." (Automotive News, March 29, 2004)

How is your credit union positioned to maintain its share of the auto lending business at dealerships?

Get Started By Developing Dealer Ties
Even in a challenging lending environment, the volume potential of auto loans through indirect lending can be tremendous in comparison to other delivery channels; it all depends on the relationship established between dealers and the credit union. For dealers, fast turnaround time on a loan application is imperative. If your credit union is closed evenings and weekends, those applications may accumulate for a busy Monday morning, if you're that lucky. Chances are strong, though, that the dealer will close the loan in your absence. Nowadays, any credit union that takes longer than a few hours to approve a member's auto loan application isn't going to capture that member's loan business.

"The 22 dealers in our network praise the timeliness and quick turnaround of the applications processed through our credit union," says Mike Newman of Monroe County Community Credit Union in Michigan, with assets of $92 million and an open field membership of 23,500. "Our credit union booked $1.3 million in auto loans last month alone, even though the majority of the volume we generated last month came in when our offices were closed. If we did not have a partnership with Lending Solutions to quickly underwrite loans for us 24/7, we would not have had the opportunity to serve our members because other financing options would get to them first."

Delivery Channels Compete on Convenience
Members may be very loyal to their credit union when they set out to car shop, but they'll still take their business elsewhere for a better, faster deal. For example, if there's instant financing on a new or used car loan with the local dealer financing representative, a member will seal the deal right away for the chance to drive away in a newly purchased car even if it means paying a higher rate. In today's technology-driven marketplace, it's timing and convenience that outweigh rates in deciding whom members choose to finance their auto loan. With this consumer behavior in mind, taking a chance on member loyalty is chancing your bottom line. When the loan application process is easy and convenient for the dealer representing your members' best interests, the relationship developed pays off. Getting a decision back to dealers within 12 minutes when submitted 24/7 via fax or automatically decisioned via the Internet allows your credit union to compete effectively in today's market.

How To Ensure Your Members Will Look To You
1) Awareness
Get the word out to members and let them know you're there ready to serve their borrowing needs. Educate your members about the great financing available through their credit union, about the buying process itself and about the offers that captive financing companies are really offering. (You know the zero-percent financing that has a qualification list that only a small percent are intended to fill.) Explain to your members that consumers are most often better off taking the rebate and financing through their credit union.
2) Compete on convenience
With all of the technologies available, having a variety of service delivery channels ready for your members to access is essential. Either provide this directly through the credit union
or partner with a provider.
Keys to a successful indirect lending strategy include:

  • In-house manager to pursue the CU's best interests
  • Developing the CU's dealer network
  • Fast response times: loan applications, online or faxed, take your members "off-the-market" only when a prompt decision is delivered (either with automated decisioning or underwriting support 24/7)

Launching a turn-key auto-lending program is a matter of necessity for credit unions who wish to effectively compete against any lender in the financial services market and strengthen
their lending relationship with members.

Target Marketing Needs Support
Credit unions relying on targeted marketing methods, such as auto loan pre-approvals, to sustain growth are not maximizing the opportunity. Even as these pre-approvals arrive in the mail to
spark member interest and prompt action, members still have to visit dealers who will try to steer them into other financing. The pre-approval campaign is jeopardized, unless your credit union has established an indirect lending program with local dealers.

For example, according to Monroe County Community CU it is the dealers in the network who fulfill the marketing
efforts. "Though we market the indirect lending throughout the year with other loan promotions in member newsletters, direct mail and newspaper advertising, it is the dealers who are actually our best marketers. We don't offer exorbitant reserve fees like banks or other finance companies, the dealers just praise the timeliness and fast response of the turnaround," says Newman.

With an indirect lending program in place, your credit union is included in the pool of lenders that dealers can access, which means you can compete for your members' auto loan business. Add to that the availability of 24/7 loan processing via fax or online for on-the-spot decisioning and the process is easy all around for dealers and members alike. The dealer makes another sale, the member walks out of the showroom with financing and the credit union keeps more of the member's business.
(Taken from actual conversations. Participation was in no way compensated for involvement.)

If your credit union is interested in learning more about improving your lending initiatives feel free to contact John Dowling, manager of client sales development with Lending Solutions, Inc. LSI has helped credit unions across the country compete more effectively in today's challenging lending environment and offers guidance in implementing indirect lending programs in time for the busy auto buying season. John can be reached at 888-LSI-NLPC (574-6572) or e-mail jdowling@nlpc.com.

 
 

May 3, 2004


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