While the market for auto loans is increasing, credit unions are leaving a significant number of un-captured auto loans on the table to the advantage of banks and other financial institutions.
According to the Credit Union National Association (CUNA), the credit union share of the auto loan market reached 36 percent last year, with new vehicle loans up 13 percent to $72 billion and used vehicle loans up 10 percent to $128 billion.1 While these percentages represent the largest market share in a credit union’s loan portfolio, two-thirds of members are still financing with other lenders.
In addition to the CUNA market analysis, Experian recently reported a 3 percent increase in car registrations in the past year, and an increase in both term lengths and loan amounts.2
Why Is The Market Growing?
Due to the financial collapse in 2008, the number of new cars purchased dramatically decreased in the years that followed. Experian research indicates we are entering the “sweet spot” of pent-up demand to replace approximately 98 million autos still in operation, purchased from 2002 to 2008.2
What Can Credit Unions Do Now?
In the short term, credit unions will have a small window of opportunity to offer refinance deals to used car-buying members before the number of used cars on the market starts to dramatically decrease. For the future, credit unions will have more prospective new car-buying members available for marketing purposes.
Many credit unions are participating in the resurgence of the auto loan market using a variety of mass marketing techniques such as billboards, radio ads, statement inserts, and newsletters to invite their members to apply for a loan, often executed with sporadic timing and delivering mixed results.
Credit unions can improve the performance of their auto loan marketing effort with a consistent and targeted pre-screened, direct marketing approach.
Credit Union Experience
APCO Employees Credit Union($2.4B, Birmingham, AL) recently took advantage of the current auto loan marketing environment with great success. Between March 2013 and February 2014, the credit union increased its auto loan portfolio by $10.5 million.
All of APCO’s auto loan growth (outside of indirect) came from one marketing program: Auto Loan Recapture® (ALR) from CUNA Mutual Group and Ser Technology. Surprisingly, the Auto Loan Recapture campaign is based on direct mail. According to APCO’s Loan Manager Greg Keller, “It completely disproved common wisdom that people don’t read their mail—if you give them a compelling reason, they do. On numerous occasions, we had members walking in the door with the letter in their hand asking to transfer their loan. Nearly 500 members obviously did read their mail.”
The Auto Loan Recapture campaign uses monthly, targeted direct mail with follow-up email to reach qualified members who have auto loans with other financial institutions. It’s a tool that can be used to recapture existing loans and acquire new ones, with specific lending guidelines selected by the credit union. ALR focuses on sending the right message to the right member at the right time.
APCO targeted members who had an auto loan elsewhere with a minimum balance of $7,500 and a credit score of 650 and higher. Members who refinanced their loan with APCO received a better rate and a $100 incentive. “We had tried similar programs in the past that we ran in-house with data from our credit bureau,” said Keller. “Those campaigns ran a month or two and were typically promoted only through our newsletter and word of mouth. We’d had decent results, but they were temporary.” Unlike their in-house program, Keller liked that ALR could run with very little input from his staff, was an ongoing program, and relied on direct mail. “This gave us an easy way to try it.”
Regardless of the marketing method, credit unions should use this unique timeframe in the auto market to increase their marketing activities and capture new auto loans, both new and used. If you are interested in the Auto Loan Recapture campaign, contact Aaron Jahnke – Direct Sales Specialist for Loan Generation Marketing, CUNA Mutual Group, at firstname.lastname@example.org or 1.800.356.2644, Ext. 665.8932.
This article was written by Jackson Hunt, VP of Marketing at Ser Technology Corporation.
1autonews.com: Credit unions’ 36% auto share is ‘significant’, March 2014
2Experian Automotive Update - Vision 2014 Quality Growth: Defining New Strategies: slide 44, 2014
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