One Size Does Not Fit All in Growing Auto Lending
Call report data recently released by the NCUA indicates that in 2013 credit unions experienced strong loan growth led by auto loans. Experts are projecting further growth for this year and with average car ages at approximately 11 years, auto loans remain a promising product.
Yet, at February's annual Government Affairs Conference many credit unions said they either have no particular auto buying program or resource in place for members or have not attained the anticipated organic growth by implementing one. When asked what they were doing to promote auto loans to their existing members the responses included, “We have our rates up on our website,” “We offer rate discounts” and “We gave up and the focus is on building our indirect lending program.”
These practices, although standard in the credit union industry, are not going to help you increase your auto loan share to your existing members. Far from it.
So what is the key ingredient to growing auto loans organically?
Many credit unions will rely upon their rates to promote loan growth. But let's face it: Today's auto loan market has manufacturers in near bidding wars on incentives and 0% financing. Plus, many financial institutions provide dealer incentives in order to secure the loan that far exceed what an average credit union will pay. Your rates alone can't compete. So why keep pushing them?
The most successful credit union auto buying programs feature emphasis on building relationships and employing on-the-ground tactics all year round and at every touch point. The car buying process begins with the consumer researching vehicle information and dealer inventory – not rates. Find out what your members are looking for, reach out to them, listen to their stories, and make your credit union the first place they think of when they are ready to buy a car.
Those touch points are critical in getting the message out about why credit union financing is better. Make sure your advertising and communication pieces explain why your auto finance options are better – tell the story of why 0% financing is not really 0%, how pre-qualifying saves time and hassle at the dealership, that there are no extra costs under the guise of “fees”, etc.
Ultimately, it should be your credit union's mission to educate your members on what they need to know before they buy a car so they get the best deal. This comes in many forms and is not limited to how much they paid for the car.
Dealers will try to sell your members a higher rate on their loan or insurance products to earn a higher commission. This is where, on average, a credit union's offering will be better than what a member can get at the dealership. This valuable opportunity to educate and engage members starts with a credit union being relevant during the research process by providing them the tools and tips they are looking for.
How you do this will be dependent upon the type of communications your members respond to best. Members at one of our larger credit unions are very responsive to email messaging, although it reaches out to their members via traditional avenues such as newsletters, statement inserts and branch advertising. However, it knows the biggest impact will be through the digital vertical. As you build those relationships, find out what your members prefer and respond to different types of communication and capitalize upon it. The main thing is to be consistent and persistent. Your members are always in the market to buy a car and you need to be there when that opportunity presents itself.
The credit union culture is to seek out and operate under the best interests of members. But we often see products or programs promoted that serve the product line or an outside vendor. When you are choosing or implementing an auto buying program for members, make sure that your philosophy and values are represented.
One of the first things to do is take a look at what the auto buying program offers. Are you able to incorporate your brand easily into the product and tailor it to your credit union, and more importantly, your members’ needs? Find out if the program aims to keep your member financing with you, what their dealer relationships are and how their process works. Very simply, follow your auto buying program's revenue stream and see if it conflicts with your credit union's best interest.
In fact, many credit unions we have partnered with were promoting NADA or Kelley Blue Book on their website. No question, these are trusted sites, but when you look closer, many credit unions are missing the big picture. They are sending their members to these sites and now the member is being sold non-credit union financing through links and web banners. Why would a credit union do this without at least being compensated from these companies?
A valuable auto buying program is not a plug-and-play resource; simply slapping your branding, loan rates and contact information onto a product offering is not going to cut it. Test the program. Go in and find out what happens when you send a lead through. Does the program provide you with member lead referrals before they go to the dealership, thereby increasing your chance to secure the loan? How accessible is the company you partnered with if you want to collaborate further? Do you have the ability to customize the site to match your brand and promote marketing initiatives?
Finally, you want to make sure the program is about the credit union and providing the best auto buying experience to your members. In many instances, vendor programs have been developed with a focus upon the dealer or under the guise of offering the lowest price to credit union members. They offer the familiarity and comfort of a brand that is easily recognizable, but may not deliver on growth. Don't allow the attractiveness of brand recognition to interfere with your mission. After all, who has better brand recognition and value proposition than credit unions with their members?
It is time to take back control of your own brand, of your organic auto loan growth and most importantly, your credit union's future.Robert O’Hara is vice president of strategic alliances at GrooveCar Inc. in Hauppauge, N.Y.Contact(631) 454-7500 or firstname.lastname@example.org