The purchase and financing of big-ticket items such as vehicles are rarely impulse decisions, but the frenzy surrounding the winter shopping season demonstrates how good deals, time limits, and proximity to like-minded shoppers can turn fence sitters into decision makers. By creating environments where shoppers can peruse a wealth of auto inventory with the financial support to make good decisions within earshot, credit unions can ramp up awareness and activity in this key area of the portfolio. But credit unions investing the time and effort to sponsor a public sales event need to understand that the rules of “go big or go home” apply.
For example, rather than focusing on singular, one-off events at individual dealerships, Desert Schools Federal Credit Union ($3.2B, Phoenix, AZ) works with a California promotions company to sponsor an annual used auto tent sale that attracts more franchised dealers and larger crowds than the cooperative could drum up on its own.
“We saw the activity that large-scale automotive events can create, and one of the organizations that put on these events was interested in having a credit union presence there,” says Gary Sneed, the credit union’s chief lending officer. “Having everything in one place creates a real sense of convenience for the buyer, so we did our due diligence and ended up partnering with that company for our first tent event in 2012.”
To sweeten the pot, the credit union also offers rate discounts during each sale.
The 2013 event at the University of Phoenix Stadium drew more than 2,000 people over the course of three days and generated double the loan volume of the credit union’s 2012 sale — $3 million in new loans or roughly 30% of the credit union’s normal monthly auto activity.
Events like these can be extremely effective without straining your credit union’s budget. Desert Schools’ third party company does the heavy lifting of enlisting potential dealers and typically secures between 10-15 each year. These businesses pay to be a part of the sale and the company uses that revenue to handle things like event marketing, location costs, and other logistics. Ultimately, though, the credit union retains final say in each of these decisions.
“We’re mainly looking for it to bring in dealers who either already support us on our indirect program or who have a good reputation in our marketplace,” Sneed says.
The only upfront cost for the credit union stems from its internal promotions. For example, in the weeks leading up to each event, Desert Schools prescreens its membership base and sends 10,000 to 20,000 prequalified notices along with event invites.
“We start with all members in good standing and then filter that to see who might actually be in the market to buy a car in the next six to 12 months,” Sneed says.
Although slowdown in new auto loans remains an institutional sticking point, used auto activity is up 29% as of third quarter 2013, according to Callahan & Associates’ Peer-to-Peer analytics, and total auto growth is at its prerecession level of 3.2% as of the third quarter.
Indirect lending has played a slightly smaller role in the credit union’s auto strategy since the economic downturn. However, Desert Schools still has a strong network of approximately 200 franchised dealers and monthly volume from that business line has increased roughly 250% over the past three years.
For Desert Schools, the common fear that indirect members do not fully engage with a credit union has proven unfounded. As of the third quarter, Desert Schools’ average member relationship is up 5.67% annually versus a negative 0.68% drop among peers with $1 billion or more in assets.
“Increasing our awareness in the community — whether it’s through refi offers and prequalifications, our online car buying service, new indirect relationships, or these large public events — has been a big priority for us,” Sneed says. “Showing that we have real options for these auto buyers is helping them think of us first. ”
The More The Merrier
According to a 2013 study by autotrader.com, younger members might require more hand-holding during the buying process. Generation Y members visit 3.1 dealerships on average before buying a vehicle versus 2.5 for Gen X individuals and 1.9 for baby boomers. Still, this young, decision-wary group represented 25% of all auto buyers in the United States last year, according to autoguide.com. For this and other reasons, building a solid network of dealer partners and hosting multi-dealer events where consumers can see several options in one place will be an area of opportunity for credit unions in the years ahead.