Auto lending has always been at the heart of the value credit unions deliver to their members. Even with recent declines, auto loans account for 29% of credit union portfolios and an even greater percent of credit union loans. But with the recent turbulence in the marketplace from a drop in auto sales to the recent re-emergence of other lenders to new norms in the auto buyer’s behavior, CUs must take a closer look at how they can be more competitive.
As the economy begins to slowly right itself, new vehicle sales have continued to rise in 2011, and with a 20% gain in sales between the first quarter of 2010 and the first quarter of 2011 (according to CNW Research), credit unions have a vital opportunity to grow their auto portfolios. At a time when fees such as courtesy pay and interchange are coming under pressure, the importance of auto lending to credit unions’ bottom line is only magnified. To take advantage of the improving marketplace and increase lending opportunities, credit unions need to incorporate strategies and programs that will effectively give them an advantage over competing lenders.
As always, one of the most powerful–and unique–tools in the credit union arsenal is the special relationship between a credit union and its members. Credit unions’ ability to recapture market share and grow auto loan portfolios depends largely on their ability to enhance member loyalty and retain member loans.
To grow their lending portfolios, credit unions must look to strengthen their relationships not only with members but also with local dealers.
By being fully engaged with members through the entire vehicle buying process, from the initial auto shopping experience to the final purchase of the vehicle, credit unions have a great opportunity to significantly improve their chances of securing member loans at the dealership. Pre-approving member loans and making them available through the dealer’s credit union portal simplifies the process for both the consumer and dealer. Enabling members to research and shop for their next vehicle, as well as secure loan pre-approvals, via their credit union’s website, provides credit unions with ideal solutions to enhance member convenience and help capture more member loans at the point of purchase.
Nearly eight out of 10 credit union new vehicle loans made through the CUDL lending system/platform are in the prime market. However, the percent of prime borrowers in the new vehicle category has declined to 77% from 79% in 2010. At the same time, credit unions have found some success in the nonprime market over the last year, as we have seen nonprime loans grow from 17% to 18.5% on the CUDL system. Credit unions must look at how they can adjust their lending requirements to fit the needs of their members in today’s competitive landscape. Incorporating more robust analytic tools that improve overall management of lending portfolios enables credit unions to lend more aggressively and pursue more nonprime lending opportunities.
Creating a competitive edge in today’s marketplace also requires credit unions to adopt new ways to connect with their members early in the auto buying experience to help drive loan activity. Carat’s 2010 "New Shopper Journeys Survey" revealed that 38% of U.S. shoppers use their mobile devices during the shopping process prior to buying products new in-store.
Additionally, the Mobile Marketing Association’s July 2010 "U.S. Mobile Consumer Briefing" noted that almost half of U.S. adult mobile users expect to access websites from their mobile phone over the next year.
Implementing strategies and programs that leverage today’s popular digital technology such as smartphones can play a significant role in growing loan activity. From shopping for vehicles to applying for a loan, incorporating digital technology will provide credit unions with an important and effective way of marketing their loan products, strengthening member loyalty and improving their ability to capture more member loans.
Joe Greenwald is vice president of marketing at CU Direct Corp.
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