Credit Union of America ($522M) needed to capture the auto loans it was losing at dealerships, as well as grow its membership. The Wichita, Kansas-based credit union recognized that in order to correct its trajectory and unlock its full potential, it would need to adopt or incorporate a new auto lending system as well as find a better way of working with local dealers to capture more loan opportunities. It also needed a strategy to establish and maintain the same level of convenience that major lenders offered their borrowers.
The Challenge: Increase Loan Volume And Grow Membership
Credit Union of America didn’t have a true indirect lending program in place and it hadn’t had success in developing solid relationships with local dealers, which hindered new loans as well as the acquisition of new members.
As a result, the credit union was losing members (and loans) at the point-of-purchase and its auto loan portfolio was shrinking. Moreover, what auto loans the credit union did obtain were mainly refinanced loans that had originally been made at dealerships through other financers. The credit union’s existing members were dissatisfied with the process of getting auto loans from the credit union. Additionally, the credit union wanted to improve its membership growth rate through the indirect channel.
The Solution: Implement An Indirect Program While Reaching Out To Local Dealerships
“We were losing our members at the dealership,” says Gary Hull, the lending manager of Credit Union of America. “With no way to refer our members back to us for financing, our new car sales were really declining.”
After looking into a number of solutions that were available, Credit Union of America determined that it needed to partner with another institution to implement an indirect lending solution that could address its specific concerns.
“We also wanted to change the nature of our relationship with the dealer,” Gary says. “We wanted to make sure that it involved more than just lip service – the courtesy calls where you pick up everyone’s card just to show you were there.”
After implementing an indirect program to work with area dealers such as Scholfield Honda, the credit union’s staff took on a new initiative — to speak with everyone at the dealership, not just the front office staff, and not just about business.
“We took the time and effort to develop personal relationships with everyone at Scholfield Honda and it changed everything,” Gary says.
The Results: A Big Turnaround
Credit Union of America was able to turn its adversarial relationship with dealerships into partnerships, while its membership growth has mirrored its growth in lending opportunities. The cooperative now does business with 73 local dealers and was able to grow its membership from approximately 25,000 individuals to more than 49,000 individuals in 2012.
Since incorporating this new strategy, the credit union has also experienced exceptional auto loan growth and achieved 32% penetration for auto loans among its membership.
What’s more, 91% of loans that Scholfield Honda sent through the CUDL lending platform in 2011 went to Credit Union of America. The cooperative has experienced a 42% growth in indirect auto loans since 2005 and it processed 6,552 auto loans or over $100 million in originations throughout 2012.
“There’s a huge distinction between making a courtesy call and coming in because you’re friends with everybody at the store and you just want to say hi,” says Ron Godwin, the finance manager at Scholfield Honda. “There’s a reason why Gary has all of our car loans, a reason why he has my mortgage, and a reason why probably 75% of our employees at Scholfield Honda have their personal loans with Credit Union of America. It’s because Credit Union of America here in Wichita cares about Scholfield Honda’s personal success.”