Driving Loans in the New Auto Lending Marketplace

Auto loans account for 29% of the average credit union's portfolio. But with market turbulence and new norms in buyer’s behavior, how can credit unions stay competitive?


In the past 18 months, banks, captives, and other financial institutions have regained the market share they lost during the height of the economic downturn.  In 2008, banks saw their market share drop to just under 30%, but they have since rebounded to capture 38% of the auto lending pie. Captives have grown market share from 20% in 2010 to 22.5% in 2011.  Meanwhile, credit unions experienced more than a 5 point increase in market share between 2007 and 2009 (16.9% to 22%), but have since seen their share drop to mirror 2007-2008 levels of 16%.   

As the economy begins to slowly right itself, new vehicle sales have continued to rise.  With a 20% gain between the first quarter of 2010 and the first quarter of 2011 (according to CNW Research), credit unions have a vital opportunity to grow their auto portfolios.  At a time when fees such as courtesy pay and interchange are coming under pressure, the importance of auto lending to credit unions’ bottom line is only magnified.  To take advantage of the improving marketplace and increased lending opportunities, credit unions need to incorporate strategies and programs that will effectively give them an advantage over competing lenders. 

As always, one of the most powerful and unique tools in the credit union arsenal is the special relationship between a credit union and its members.  Credit unions’ ability to recapture market share and grow auto loan portfolios depends largely on their ability to enhance member loyalty and retain loans.  

By being fully engaged with members through the entire vehicle buying process, from the initial auto shopping to the final purchase of the vehicle, credit unions have a great opportunity to improve their chances of securing member loans at the dealership. 

Pre-approving member loans and making them available through the dealer’s credit union portal simplifies the process for both the consumer and dealer.  Enabling members to research and shop for their next vehicle, as well as secure loan pre-approvals via their credit union’s website, provides ideal solutions to enhance convenience and help capture more member loans at the point of purchase.

Nearly 8 out of 10 credit union new vehicle loans made through the CUDL lending system are in the prime market.  However, the percent of prime borrowers in the new vehicle category has declined to 77% from 79% in 2010.  At the same time, credit unions have found some success in the non-prime market over the last year, as nonprime loans grew from 17% to 18.5% on the CUDL system.  Credit unions must look at how they can adjust their lending requirements to fit the needs of their members in today’s competitive landscape.  Incorporating more robust analytic tools that improve overall management of lending portfolios enable credit unions to lend more aggressively and pursue more non-prime lending opportunities.    

Creating a competitive edge in today’s marketplace also requires credit unions to adopt new ways to connect with their members’ early in the auto buying experience.  Carat’s 2010 New Shopper Journeys Survey revealed that 38 % of U.S. shoppers use their mobile devices during the shopping process prior to buying products in-store.  Additionally, the Mobile Marketing Association’s (MMA) July 2010 U.S. Mobile Consumer Briefing noted that almost half of U.S. adult mobile users expect to access websites from their mobile phone over the next year. 

Implementing strategies and programs that leverage today’s popular digital technology, such as Smart Phones and Smart Phone Apps, can play a significant role in growing loan activity.  From shopping for vehicles to applying for a loan, incorporating digital technology will provide credit unions with an important and effective way to market their loan products, strengthen member loyalty, and capture more loans.

Auto lending is working its way back into the mainstream again, and credit unions have a significant opportunity to build their lending programs.  However, credit unions need to take the necessary steps to become more competitive by incorporating strategies that help them advance member relationships and drive loans through the member channel to grow their bottom lines. 

As a credit union-owned service organization, CUDL develops dynamic solutions, as well as training and marketing programs to help credit unions more effectively market vehicle lending to members and achieve their auto lending goals.  

CUDL’s AutoSMART Apple® iPhone® App gives credit unions an important tool that helps them stay connected with members throughout the vehicle buying process, improving member loyalty and the ability to retain member financing in-house, while driving more member auto loans. 

Bill Meyer is Corporate Communications and Public Relations Lead for CU Direct Corporation bill.meyer@cudirect.com. If your credit union is interested in learning more about proven strategies and solutions to grow member auto loan penetration and overall lending success, contact CUDL at (877) 744-2835 or visit www.cudl.com.



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