National Trends And Local Opportunity In Auto Lending

Security Service Federal Credit Union puts the right people at the right place at the right time to grow its auto loan portfolio.


New car sales are rising, but national trends have not yet translated into growth for credit union auto loan balances. Captive financers and commercial banks have flooded the market with 0% offers, making it difficult for credit unions to capture buyer attention. In aggregate, credit unions’ overall auto portfolio fell 2.7% at midyear.

At that time, credit unions held $60.1 billion in new auto loans and $104.7 billion in used auto loans. Despite lower balances in the auto portfolio, market share is rebounding, hitting 15.2% at the end of June. Credit unions now have the opportunity to capitalize on the inroads made with dealers and members during the recession to create a positive long-term effect on their portfolios.


Source: Callahan & Associates Peer-to-Peer Software

An increasing number of credit unions are turning to indirect lending as a way to make auto loans, as the strategy can be a good way for credit unions to add members as well as build relationships with new dealers. The 1,956 credit unions that participated in indirect lending at the end of June reported $70.9 billion in outstanding indirect loans.

As a percentage of total outstanding auto loans, indirect loans were 43.0% of all vehicle loans as of June, down slightly from the 43.9% of auto loans that were indirect loans in June 2010. Indirect loan delinquency has declined over the past year, falling 23 basis points to reach 0.88% at the end of the second quarter.

Source: Callahan & Associates Peer-to-Peer Software

Security Service Federal Credit Union ($6.5B, San Antonio, TX) operates the largest credit union indirect lending program for automobiles in the country. Indirect loans comprise approximately 94% of Security Service’s auto loan portfolio, and according to SSFCU, it finances one out of three cars on the road in San Antonio.

“Three out of four consumers that buy cars finance them at the point of sale,” says Jim Laffoon, executive vice president and chief operating officer of Security Service. Early on, SSFCU recognized the importance of convenient financing. It decided if its members wanted the credit union in the car dealerships, then that’s where it would be.

Indirect lending is a core competency that the credit union has developed over 20 years, and the key to its strategy is consistency. The credit union pre-approves applications and automates underwriting. To better serve members, it also examines individual applications by hand, and a team of 13 loan officers reviews every indirect loan application. Despite the technology at its fingertips, it never automatically denies an application. Loan officers, there are eight in Texas and five in Colorado, review denied applications to determine if the credit union can make the loan.

The credit union’s market stretches across central Texas down to the border and from El Paso to Corpus Christi as well as through mid-Colorado, where Security Service says it is the No. 1 auto lender. It portfolios its indirect loans — which top $4 billion — so loan officers have a decision making freedom that can work in a member’s favor. Combining individual attention with point-of-sale access, SSFCU manages a strong and problem-free loan portfolio.




Oct. 24, 2011


  • Would sure love to know what % of these are USED!
    Roger Conant
  • Thank you for the question, Roger. According to Security Service, its total auto portfolio is composed of 60% new and 40% used vehicles. Its indirect portfolio varies only slightly at 62% new and 38% used.
    Rebecca Wessler