No Time to Hit the Brakes

Coasting on loan opportunities risks losing members.


With last year’s sharp economic recession, as in previous downturns, the importance of credit unions to the country’s economic health was once again at the forefront. Suddenly, major lending institutions, from banks to auto manufacturers’ own financing arms, shrank back from issuing auto loans like Bela Lugosi’s infamous Dracula recoiling at the first light of dawn.

For a time, it appeared as though auto lending might come to a screeching halt. Much of auto lending disappeared, that is, except those loans generated by America’s credit unions. As a result, credit unions were able to move in and capture more market share, and, in the process, use the opportunity to strengthen their relationships with local automobile dealers.

According to Experian’s AutoCount, credit unions’ share of retail auto loans went from 16.9% in 2007 to 22.2% by year-end 2009, with almost all of that growth coming at the expense of the captives and finance companies. To further emphasize credit unions’ market strength, Callahan & Associates’ Peer-to-Peer software revealed point-of-purchase credit union auto loans grew steadily, from 65.4% in 2005 to 77.09% in the second quarter of 2009.

Today, however, captives have joined major banks in once again actively pursuing consumers’ auto loans, and credit unions are realizing it’s important now more than ever to ensure their relationships with their members and key auto dealers remain strong. 

“It can be tough,” says Cindy Zoldak, vice president of lending at Minnesota Power Employees Credit Union ($76.8M, Duluth, MN). “How do you compete with 0% financing?”

Partnering for Success
As everyone knows, auto loans are credit unions’ “meat and potatoes.”  They represent nearly one-third of all credit union loan portfolios. That means as the economy continues its long, slow climb back – and the competition looms larger in the rearview mirror – credit unions must take a two-pronged approach to maintaining their market share by focusing on both membership and dealer partners.  A little creativity helps, too.

“We’re a closed credit union, and our membership is well educated about what we offer,” Zoldak says. “The vast majority of our members apply for financing online. So another way we provide additional savings to our members is by offering to arrange their loan payments as biweekly payroll deductions. That way they pay off their loans faster and it ends up costing less.”

It’s also critical to keep in mind, according to JD Powers & Associates, 87% of buyers arrange financing at the dealership. This means it is essential for credit unions to maintain a strong point-of-purchase (POP) presence at key dealerships.  Without a strong POP presence, all the benefits of member awareness efforts and programs aimed at maximizing the buying experience could be lost.

While banks have historically focused solely on the bottom line, credit unions’ strength continues to come from creating and nurturing a more personal partnership with their members.  

Taking a more personal interest in their members’ financial lives and striking a partner relationship also makes sense as a way for credit unions to distinguish themselves from larger lenders, especially now that the question of financial stability has returned to the marketplace. As always, a more personal relationship, more customized offerings – even a live body at the end of a customer service line – all contribute to credit unions’ success at growing and maintaining positive relationships with their members. In this way, members feel as though they are both heard and perceived as important individuals.

But there’s another reason why this approach helps credit unions’ bottom line. By taking a keener personal interest in their members, credit unions have found their loans perform better, as well. Turns out, it’s time and attention well spent.

At the same time, savvy credit unions have also sought to take a more community-based approach, unlike the larger financial institutions that have touted their size and scope to impress their customers and, presumably, convince them of their financial stability. This community-based approach has served credit unions well as they strengthened their relationships with local dealers.

And many credit unions see these strong dealer relationships as something that will help them ride through these rough times.  Mike Simanovich is director of loan operations for Pennsylvania State Employees Credit Union, which now serves more than 360,000 members in a full range of businesses and organizations across the state. Although times are tough, he sees the energy invested in dealer relationships as a key to success in the future.  “Our dealers tell us that as soon as those special offers end, they’ll be back,” he notes. “In the meantime, we’re pretty much staying the course and making sure that we maintain those good dealer relationships.”

The theory behind credit union success remains simple: working people joining together in a cooperative venture that exists to encourage thrift and provide credit at reasonable rates, as well as offer other financial services to members. Credit unions’ conservative lending practices have helped them avoid the kind of behavior that was the catalyst behind the current economic recession. 

The competition is back in 2010, as banks and captives are once again aggressively pursuing the consumers they turned away from only a short time ago. It’s vital for credit unions to recognize that they need to refocus efforts on maintaining strong partner relationships with both members and local dealers in order to drive loan portfolio growth through existing membership. Key to this is for credit unions to be fully engaged with members through the entire vehicle-buying process.

CUDL has introduced new pre-approval solutions designed to help credit unions stay engaged with their members throughout the vehicle-buying process as well as improve member loan retention rates and streamline the loan processes for members. 

CUDL’s new SMART Approval is a flexible and fully customizable program that enables credit unions to provide their members with a simple and convenient online pre-approval application from the credit union’s website. Credit unions set their loan pre-approval standards based on their own lending parameters and members receive immediate online decisions after applying for their loans. The new CUDL Pre Approval Campaign Manager ensures the pre-approved financing credit unions market to their members are the same loans and rates their members will receive at the dealership when they purchase their vehicles. 

Both CUDL pre-approval solutions are linked to the CUDL system for an overall streamlined loan process that eliminates the member inconvenience of waiting for a loan decision at the dealership. As a result, credit unions enhance their ability to retain member loans, while improving the member’s overall auto buying experience.

As a credit union-owned service organization, CUDL develops dynamic solutions that help credit unions more effectively market vehicle lending to members, evaluate risk and revenue potential of loan portfolios, complete member vehicle loans at the point-of-purchase, provide reliable aftermarket services, and make automated loan decisions.

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



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