Successfully Driving through a Market Slowdown

Auto lending continued to be a slow growth business for many credit unions as we passed the mid-year mark.


As of the end of June, auto lending remained the only component of the loan portfolio that did not see growth over the past year. Although used auto loans have growth, it has not been enough to offset the decline in the new auto portfolio. One major factor in this decline has been slumping vehicle sales.

As of July, year-to-date vehicle sales have fallen 10.5% from 2007 levels, and it doesn’t look like we have hit the bottom yet. According to J.D. Power’s most recently revised forecast, total light vehicle sales are projected to total 14.2 million, down from 16.1 million units sold in 2007. If this forecast proves accurate, it will mark the lowest figure for vehicle sales in 15 years. Since the market does not yet appear to be righting itself, many credit unions are being proactive, expanding or developing the products and services their members need most during this market slowdown in an attempt to inject renewed growth into their auto loan portfolios.

A Dealer With A Credit Union Mentality

Truliant FCU ($1.2B in Winston-Salem, NC) has developed an auto solution that focuses on providing ease and convenience for their members, which is helping them find success in this tumultuous auto market. Truliant’s solution is to offer members an auto-buying service through their CUSO, Credit Union Auto Buying Services (CUABS). CUABS is a wholly-owned CUSO that has been in business since 1993 as a licensed automotive dealer. On average, the CUSO sells between 150 and 200 vehicles per month, and despite the slumping conditions in the external market, CUABS has an expected sales forecast of 2,000 vehicles in 2008.

In recent years, the CUSO has seen strong growth and has moved to a spacious 2.5 acre lot where they showcase more than 200 vehicles on site. CUABS has even become one of the largest independent automotive dealers in the state. Through CUABS, potential purchasers have access to both new and used vehicles. The new vehicles are made available through CUABS’ network of franchised dealers. The used vehicles come mainly from auctions and trade-ins. Currently, an estimated 60% of the vehicles CUABS sells are used, with the remaining 40% being new.

One of the driving factors behind CUABS has been a focus on the credit union difference. “The CUSO shares the credit union philosophy,” said Steve Joiner, President of CUABS. This mentality has been crucial to CUABS’ success. “We’re looking to do the right thing for members, even if it means lower margins,” said Joiner. With more flexibility regarding margins, CUABS can provide members with superior service and financing options that other dealers are not willing or able to offer, thus increasing business for the CUSO and building loyalty all in one step.

As part of the credit union movement, CUABS is set-up to offer members a “one-stop shop” for vehicle purchasing and lending options. Although individuals do not have to be credit union members to purchase a vehicle from CUABS, members of Truliant and other local credit unions that partner with the CUSO get the added benefit of tailored financing options. Credit union members have the ability to finance directly through their credit unions at CUABS, thus creating a form of indirect lending, but the credit union can deal with the CUSO and not an outside dealer. (If you aren’t a credit union member, CUABS will even help you join the credit union.) CUABS looks to be the preferred solution for a member who is in the market for a vehicle and does not want to deal with the hassle that traditionally attaches itself to the vehicle purchase process. “We are looking to insulate our members from the pressured ‘dealer experience’,” said Joiner. One of the ways CUABS emphasizes this important difference is spotlighted on the front page of their website ( where they declare “No commissioned sales people at our auto center.” This lets potential customers know right from the start that the experience they will find at CUABS is going to be different from what they might expect during the traditional auto buying experience.

Convenience Breeds Loyalty

Another way that the credit union philosophy of CUABS becomes apparent is their dedicated focus on customers. A vast majority of the features that CUABS offers are clearly designed to make the auto buying process as easy and convenient for members as possible.

In addition to the payment calculators and searchable inventory on the CUABS website, there is an additional service that truly sets them apart. To enhance the “one-stop shop” mentality of purchasing and financing through the CUSO, CUABS also provides its customers with a vehicle delivery service. Individuals who purchase their vehicle through CUABS can have access to a near-8 hour delivery zone which allows for their vehicles to be delivered in North Carolina, South Carolina, Georgia, Virginia, and even parts of Florida. This service has actually had substantial marketing benefits for the CUSO. “It usually creates some buzz when an individual has their vehicle delivered directly to their office,” said Joiner. “People ask that person about the vehicle delivery and we have seen that lead to additional customers from that particular office.”

This word of mouth advertising is an extremely important component of the CUABS model. Other than utilizing the online channel, CUABS does no independent marketing. The marketing of the CUSO is left mainly to strong word of mouth, spreading, for example, through the local Hispanic community and the SEGs of the credit unions that direct members to CUABS. This reliance on a non-traditional marketing channel has been a successful one for CUABS, as Joiner estimates that 50% of the CUSO’s business is now repeat customers.

Word of Mouth Continues the Cycle

At a time when many players are finding it difficult to succeed in the automotive market, CUABS has continued to see growth despite the current downturn. Their focus on member convenience and service has created a culture that builds, and rewards, loyalty. This loyalty has in turn come back to CUABS as those previous purchasers become repeat customers who share their positive experiences with other individuals. As these individuals then become customers of CUABS, they too perpetuate the word of mouth advertising and the CUSO continues to grow and find success.




Aug. 3, 2009



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