Buying a car can be a headache—finding one, negotiating a price, getting a loan, buying insurance—the list goes on and on. It’s enough to keep you driving that ’98 Buick LaSabre with 180,000 miles on it. But now credit unions are lightening the load for members with one-stop auto sales services, offering assistance with everything from finding the right car to financing the purchase and getting insurance. The services are a triple-header, benefiting the buyer, seller, and credit union alike.
Generations Community Federal Credit Union ($404M, San Antonio, TX), for instance, has created an online marketplace for members to buy and sell used cars by leveraging the credit union’s trustworthy reputation to bolster the transactions. The program is a one-stop shop for purchases, financing, and insurance — all through Generations Federal.
CU QUICK FACTS
Generations Federal Credit Union
HQ: San Antonio, TX
12-Month Loan Growth: 10.70%
12-Month Share Growth: 5.72%
In a slightly different approach, Purdue Federal Credit Union ($754M, West Lafayette, IN) teamed up with Phil Hunley of Auto Sales & Service in nearby Indianapolis to offer members a free auto-buying service. Hunley handles the service, and Purdue Federal provides the financing. Hunley’s compensation is factored into the vehicle’s final purchase price, which is typically competitive because of his connections and knowledge of the market. Although Purdue Federal earns nothing from the service, the credit union has boosted its auto loan portfolio 7.5 percentage points, according to 4Q 2012 data, since the program began in June 2012.
CreditUnions.com recently spoke with chief lending officer Andrew Wilson and associate vice president of corporate communications Ashley Harris, both from Generation Federal, and consumer lending manager Tracey Linder from Purdue Federal about their auto-buying services.
What was the challenge that your auto program responds to?
Andrew Wilson: We had members we worked with that we would take through the application process, get them pre-approved, and then as they were out looking to buy or sell a vehicle they would be solicited and end up going with another financial institution for the financing. That was the first pain point, and the second was we didn’t want to lose the relationship between the credit union and the member.
Tracey Linder: Purdue Federal had an auto-buying service years ago with a lot of success, but unfortunately due to staffing changes that program came to an end. When our members requested that the service be brought back, we really needed to find the right person with the right experience and the right contacts locally.
Phil Hunley has been a credit union member and, in a less formal role, has helped us with our repos and things of that nature, so we had a good relationship with him already. To team up with him this way just made sense. He had worked with some of our employees in the past, locating vehicles for them to buy, so in a way he was already providing auto-buying services for us. Our employees said how much they liked working with him and how helpful the service was. So we approached him last year and asked him how we could make this work for our members.
What is the structure of your program?
AW: We’re all about keeping it simple. We connect our members with buyers and sellers. We provide a safe environment to transact that sale at our credit union. We’ve all heard the horror stories about online ads so we wanted to capitalize on the trust and the years of relationship building that we have with our members. And it’s worked very well.
The program serves members and nonmembers alike. It’s an avenue for both groups to take advantage of the process. Nonmembers have to be eligible for membership to get financing from the credit union.
CU QUICK FACTS
Purdue Federal Credit Union
HQ: West Lafayette, IN
12-Month Loan Growth: 6.03%
12-Month Share Growth: 7.29%
Ashley Harris: San Antonio is unusual in that credit unions have a 51% market share, so we are a very heavy credit union town. On top of that, some of the largest credit unions in the United States are headquartered here. So this is just another opportunity for us to distinguish ourselves and provide a concierge service.
TL: Some people enjoy the thrill of the search, finding the vehicle they want and negotiating a price, and some people aren’t as excited about the process. So Phil takes over for those who don’t want the hassle of shopping at dealerships and haggling over the price.
Phil can obtain vehicles usually at a wholesale price, potentially saving the member thousands of dollars. If we have a member who for credit reasons needs a really good loan-to-value position, Phil may be able to help them get a vehicle they might not have afforded without his help. Also, if a member wants to know more about a particular vehicle, they can connect directly to Phil’s auto-buying page from our website and request that information.
If you know what you want — a 2010 Chevy Impala that’s black with leather seats and a sunroof with less than 38,000 miles — rather than trying to find that particular vehicle, you can let Phil know what you want and when he locates it he can let you know the price for it. But if you’re not sure what you want, Phil asks the right questions to figure out what’s important to you and the kind of vehicle that would suit you best.
How does the all-inclusive auto service benefit members?
AW: It’s a one-stop shop for the members where the trusted advisor-like relationship that we have built with them over time is continued.
It makes for a much faster response time and a smoother end-to-end experience. Having a single point of sale where they have access to a full range of products and services is valuable to our members, and they’ve told us that. We do help them determine what they need for insurance and financing and then provide the solutions.
TL: Some members may have the misconception that they need to buy from a dealer to get general auto protection and a warranty, when we actually have those priced favorably compared to a dealership. And we explain what our members are receiving for their money.
This program cuts down on fees that members might have if they bought a vehicle through another channel. Usually, if you’re financing directly with a dealer, there are additional fees tacked on to the loan, but we don’t have them.
How does it benefit the credit union?
AW: We provide our members with another tool to help them with their overall financial health. This isn’t just about providing a service; it’s about the relationship with the member.
The auto program is less about making money and more about supporting the needs of our membership. As long as we are financial advocates for our members, they will continue to come to us for financial products and services that benefit them and us.
AH: We’re not interested in just making a sale. A lot of financial institutions they just want that one loan, but we want the whole relationship, which includes making sure that you’re making the best decision possible.
TL: Obviously it works out well for the credit union. We’re protecting loans. If a member has a warranty, then we know the vehicle that we have as collateral is well-protected.
We have had situations where people see the advertisements, recognize Phil from him helping them with something else, and then get in touch with him about this program, which leads to them becoming a credit union member.
What advice do you offer credit unions looking to start a similar program?
AW: Know your members. Identify their pain points and their challenges, and then do everything you can to assist them. It’s really about the long-term relationship. I can’t stress that enough.
TL: It’s also about whom you’re teaming up with. We already had positive experiences with Phil and we understood his philosophy for selling cars. We had to, because we are putting our members in his hands. You really have to make sure that this is somebody you’re comfortable with and who has the same values that your credit union does.