The credit union auto loan portfolio is booming. At third quarter, all U.S. credit unions posted 15.29% year-over-year auto loan growth, a rate actually down four basis points from the same period one year ago. Auto loan penetration is increasing as well, at 18.27% as of third quarter, compared to 17.33% in 2014.
It’s a fruitful time to make auto loans. For credit unions looking for inspiration, here are 10 auto lending strategies that have proven successful in 2015.
Grow ($2.1B, Tampa, FL) has spent the past three years shifting its loan portfolio toward more auto lending, which now represents more than 50% of its loans, a greater percentage than at similarly sized credit unions. Much of this auto growth has come through indirect lending through dealerships in Florida and South Carolina. What’s more, approximately 40% of those new members are also engaging with the credit union’s other services.
There are 15 payday lenders within three miles of Manatee Community Credit Union’s ($30.1M, Bradenton, FL) headquarters in Bradenton, FL. In areas without dependable public transit, such as Bradenton, where cars are a necessity, these opportunists can take advantage of those with the most need. In late 2012, the credit union took steps to correct this disparity through a program called Reliable Ride, a joint venture between United Way of Manatee County, the credit union, and Enterprise Rent-A-Car to provide affordable, quality transportation to low-income borrowers.
In the past 15 years, Educators Credit Union’s ($1.5B, Racine, WI) auto lending operation has gone from a multi-credit union CUSO, to its own in-house sales operation complete with its own car lot, to turning over sales to a third-party operator — a former employee who now works with Educators’ own CUSO as his exclusive in-house financing partner. Finally, the credit union feels it has fine-tuned its car-buying services to the benefit of its members and to the benefit of its growing loan portfolio.
Funding shortages cause public school systems to budget more conservatively, even cutting certain programs. Inspirus Credit Union’s ($1.04B, Seattle, WA) core membership — which includes school employees, parents, students, and volunteers — all share a commitment to education, making the struggle more personal. To that end, this summer the Seattle-based cooperative rebated 1% of members’ auto loans or refinances up to $350 to the school of their choice.
No one dreams of taking out an auto loan; they just want a car. But going to a dealership, test driving a car, and gaining loan approval takes a lot of commitment and requires several moving parts. For a credit union that wants to lock down the financing, it also provides an opportunity. What if the credit union could own more of that process? That’s a question Redwood Credit Union ($2.7B, Santa Rosa, CA) asked, and in 2004, it created its own auto dealership and hasn’t looked back.
In areas where outdoor leisure is a large part of the day-to-day lives of members, RV loans make sense. WSECU ($2.3B, Olympia, WA), based in Olympia, WA, works in one such area. For many years the institution has been the go-to source for RV financing. In fact, on average, these direct loans generate a steady flow of $10 million to $14 million each year.
When indirect lending margins at Orange County’s Credit Union ($1.2B, Santa Ana, CA) started to shrink, the $1.2 billion cooperative injected life into its auto portfolio with a new focus, a fresh marketing campaign called Shrink My Debt, and different metrics.
Many credit unions are able to make gains on their auto portfolios through indirect channels and strong dealer networks. Western Heritage ($79.01, Alliance, NE), Ferguson Federal ($57.5M, Monticello, MS), and California ($1.4B, Glendale, CA) credit unions, however, have seen tremendous growth without the benefit of indirect auto lending. In a way, these institutions are taking the road less traveled to increase loans and strengthen relationships.
Not all dealerships are the same, so to make the most of resources, credit unions have developed preferred auto dealership programs that strengthen relationships and can offer lower rates and quicker funding to members. Three credit unions with strong preferred auto dealer programs are Ent Federal Credit Union ($4.2B, Colorado Springs, CO), Community Financial Credit Union ($665.4M, Plymouth, MI), and Catholic Vantage Financial Credit Union ($83.7M, Livonia, MI).
Oregon Community Credit Union ($1.3B, Springfield, OR) has the third-highest market share by loan volume in the state of Oregon, trailing only Wells Fargo and Toyota Motor Credit. Jerry Liudahl, the credit union’s chief credit officer, points to a strong commitment to indirect lending and a robust auto dealer network as keys to success.