Credit Unions’ Impact on the Automotive Marketplace

Indirect lending has played a key role in credit union growth, from adding to the bottom line and to membership levels, to increased credit union auto lending market share – an 18% market share in 2006, and the industry is taking notice.


The continuing growth of indirect lending over the past decade has greatly benefited credit unions in two major ways: many credit unions have learned that it supports their bottom line, while it drives an increase in membership.

Driving Membership Growth

According to The 2007 Annual CUDL Business Intelligence Report, 30% of all CUDL credit union loans originated at the dealership went to current CUDL credit union members.  The remaining 70% of loans went to members who joined their respective credit unions at the dealership.

“The Xerox Federal Credit Union has been offering indirect auto lending since 1999,” notes Timothy R. Myers, Vice President Sales & Member Services. “It has boosted our membership by over 20,000 new members.”

Perhaps the single biggest factor driving this growth is the ability credit unions now have to open new membership’s right through the dealer. When they learn of the savings offered by indirect lending, potential members are usually eager to sign up. Additional financial services through cross-selling efforts often follow, and in this way indirect lending supports the credit union bottom line, as well.

“Indirect lending has helped boost our membership,” notes Marsha Combe, vice president of call centers at America First Credit Union. “We are able to contact 30 to 50% of those indirect new members each month, and succeed in cross-selling additional financial services to half of those new members contacted.”

Evolving Dealer Relations

Another element driving the ongoing success of indirect lending is the changing relationship of auto dealerships and credit unions.

Less than ten years ago, dealerships and credit unions viewed each other as competitors in the indirect lending arena, which both at the time saw as a zero-sum game: every financing dollar captured by one was a dollar lost to the other.

With the subsequent growth in indirect lending, however, dealerships and credit unions have joined forces and are together grabbing a bigger piece of the auto loan pie.

According to the J.D. Power and Associates 2006 Consumer Financing Satisfaction StudySM, the growing rate of alliances formed by credit unions and dealers to offer new-vehicle financing has resulted in nearly 10% of loans issued at dealerships—up from nearly 7% in 2005 and only 3% in 2004.

Better Rates and Terms a Win-Win For All

Through the indirect lending channel, credit unions are able to provide more favorable rates, as well as longer term loans. These two factors are particularly beneficial and appealing to both members and consumers at a time of rising interest rates, as lower APRs, coupled with extended terms, help to lower the cost of financing a vehicle. 

As credit unions have become more sophisticated about their lending programs, auto dealerships have taken notice and embraced them as partners. Now taking advantage of credit unions as a competitive lending force, many dealers, in fact, readily say that credit unions help them sell more autos as well as finance more buyers.

Dealers are also responding to better fees on the loan contracts. Dealerships used to make more money by sending purchase or lease contracts to banks or finance companies, but now credit unions have upped the ante and typically pay dealerships a full 1% of the loan contract. A number of credit unions permit dealers to mark up the wholesale interest rates on loans, as well.

Indirect lending has played a key role in credit union growth, from adding to the bottom line and to membership levels, to increased credit union auto lending market share – an 18% market share in 2006, and the industry is taking notice.

To learn more about this article and topics related to indirect auto lending, check out CUDL's Merge Winter issue and the inaugural issue of the Business Intelligence Report. Learn more at

A Credit Union-owned Service Organization, CUDL develops custom applications, training and marketing programs to help credit unions achieve their auto lending goals. The CUDL Network connects over 8,400 automobile dealerships with over 580 credit unions and their 18 million credit union members nationwide. 



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April 16, 2007


  • In this article, CUDL is looking at credit union auto LOAN market share, which was 18.0 percent in 2006. In this calculation, CUDL is not including leases and is focusing on credit unions'' retail loan share, since this is where credit unions do almost all of their business. The March 8th article looked at credit unions'' share of all auto financings, including all loans and leases. Thus, in that article, credit union market share was listed at 16.1 percent
    Joe James
  • My rating of the article is poor because on March 8, 2007 in the webinar on auto lending, different "facts" came out. This article claims that credit unions hold 18% of the market share and this is growing yet the previous one said 16.1% which was down 1% from 2005. I would like the actual #s to make sense. Whichever # is correct should be used.
  • Once again CUDL has written a meaningful article about value when using an outside source for obtaining new members. I''m sure everyone realizes the marketing dollars that are saved by obtaing new members from a free source. Just remember that you need to minimize your risks by properly controlling your dealer relationships.
    Frank Mercer
  • All things said and done, I believe that CUDL has done a good job with communication on their efforts and what they are trying to achieve in our ever changing marketplace. As far as the comment that CUDL does not have the Intergration technology available to a dealers DMS, I''ve spoken to some larger Dealerships which are using CUDL and they have no problems with the DMS which CUDL provides. Again, good article and I look forward to the next one.
  • We took the total change in indirect loans outstanding that CUDL credit unions reported to the NCUA divided by what the total industry reported. Based on RouteOne''s user list and CUDL''s records, there are only a handful of CUDL credit unions that also use RouteOne. DealerTrack doesn''t publicly list their users, but I''d say it''s about the same for them as well.
    Joe James
  • Joe, how did you arrice at that number? Best I can tell, many of the CUDL credit Unions are also on DealerTrack and Route One.
    James Smithson
  • CUDL credit unions'' accounted for approximately 60% of the increase in indirect loans outstanding that credit unions experienced in 2006.
    Joe James
  • I too was confused at the numbers presented in here. I would be interested in seeing what percentage of this increase of indirect loans was via CUDL versus DealerTrack or Route One. I would imagine that it is small as DT and Route One are free to the dealerships and have integration to the DMS systems.
    James Smithson
  • Joe: I wasn''t the one with the initial question, but I too was confused. That was a helpful explanation of why the numbers cited differ. Thanks! PS. I miss your sports articles. Based on this year''s CU data, who will win the stanley cup?
    G Bettman