Despite Current Gloom, Brighter Future Is on the Horizon for CU Auto Lending
LAS VEGAS -- Credit unions may be witnessing an auto lending gloom these days and yet there's a bullish future, provided the industry takes heed of problem areas, attendees at the annual CU Direct Corp. Auto Lending Symposium were told last week.
There are indeed negatives and disappointments in the indirect auto lending performance so far in 2008, but they are countered by a host of positives, declared Tony Boutelle, president/CEO of the California-based indirect CUSO.
Still, Boutelle, who characterized the indirect changes as reflective of an overhaul in the entire automobile marketplace from manufacturers to dealer sales, said much CU work needs to be done in such areas as collections, remarketing and loan pricing.
It is particularly disappointing, he said, that overall CU market share declined in the first quarter from 16.9% in 2007 to 15.3% in the first quarter. During the same period, banks increased from 32.6% to 36.3% with captives also showing a decline.
Joining Boutelle in an assessment of performance at the CU Direct conference was Rick Apicella, an Atlanta auto finance consultant. He said that despite the tough environment, the industry's close ties with dealers and members make "credit unions the place to be" now and in the future.
"There's never been a better time for you to make great strides and seize the day," professed Apicella, automotive finance practice executive at Benchmark Consulting International. He said he is bullish on CUs future in auto lending.
Apicella, a former partner at Deloitte Consulting, said funding problems and FICO issues hinder both captives and banks. But, CUs, "if they stick to their knitting," can weather the current storm well because of their favored status among the dealers, the loyalty generated from members and their rate advantage.
Looking over his audience of 500 CU executives at the Venetian Resort and Casino, Apicella said the fact that they were here is a positive as compared to meetings of the National Automotive Finance Association grappling with "a 40%-50% decline in attendance."
In his speech, Boutelle presented a report card giving both good and bad marks to CUs involved in indirect lending. He said on basic "core competencies as well as loan booking and servicing, he was giving the industry 'Bs.'"
But on collections and pricing, he handed down a "C" based on more tech work that needs to be done. And on remarketing, he gave CUs a "D" with major work needed on how CUs handle repos. The overall grade for all areas was a "C+," which means CUs need to pick up the pace.
Boutelle said he found it disconcerting that only in four states--Utah, Oregon, Washington and Colorado--did a single CU hold a dominant position in auto loan market share; that kind of CU positioning needs to be repeated in far more stats with deeper penetration, he advocated.
To address some of the issues raised in his remarks, Boutelle pointed to several CU Direct efforts this year, including signing a deal with Manheim, the Atlanta remarketing firm, to permit safe access to independent dealers, development of new navigation tools on loan decisioning and next day funding with corporates.
In separate remarks citing the 10-year growth cycle of CUDL under Boutelle's leadership, Diana Dykstra, president/CEO of San Francisco Fire Credit Union and a CUDL director and podium moderator, said CUs should be proud of the CUSO's record today with 660 participating CUs and 9,200 dealers.
That is no small feat, she said, adding that she was troubled "at what I just heard from that speaker" in a reference to Apicella about large numbers of CUs joining DealerTrack Inc. "I'm on my soapbox now, but why would credit unions join an organization" that has strong bank ties, she asked. She noted that the CUDL Board recently reaffirmed its opposition to letting small community banks join.
"This is a credit union organization," she said, maintaining that the board felt strongly it should stay that way.