City County CU Brings Used Car Sales In-House
There's no exact count but when it comes to used car lots, AutoBranch may be one of the very few owned by a credit union.
The $414 million City County Credit Union in Margate, Fla., launched the business in 2004 and today, the lot (pictured at left) sells 40 to 50 cars a month, according to Lloyd Gill, president/CEO of the cooperative. In 2013, 489 cars were sold compared to 404 in the lot's first year.
Drive down busy S. Federal Highway in Fort Lauderdale, Fla., and AutoBranch will stand out because it doesn't resemble the typical used car lot with a “Buy Here, Pay Here” banner flapping in the breeze. The location was formerly a new car dealership and the building looks clean and inviting and the lot is orderly.
“The venture is profitable,” Gill said. “We sell a lot of extended warranties, GAP and credit life disability. We sell warranties and GAP with a penetration rate of about 90%, and credit life/disability (at) about 50%.”
AutoBranch also offers a sub-prime auto loan program that accounts for 20% to 25% of the vehicles sold.
“It helps a lot of members,” Gill said.
Nearly 2.4 million cars were sold at more than 33,000 “Buy Here, Pay Here” lots nationwide in 2010, the latest year tracked by CNW Marketing Research. It's estimated that the dealers make roughly $80 million in loans each year.
When AutoBranch opened, the credit union noticed an immediate jump in used car loan volume, Gill said, attributing the hike to incremental new volume. According to Sandra Spence, City County CU vice president of advertising and public relations, the credit union does not finance all the cars sold and reposessions are rare.
City County CU touted several reasons to shop at AutoBranch including that the vehicles are ASE certified, have passed a 160 point check of key components and each auto comes with a free Carfax report. There's also a free car locator service for those not on the lot. In addition, AutoBranch offers a free car transport service and will bring the vehicle to the buyer. There's a price match guarantee: If someone else has a lower price on the same vehicle, AutoBranch will meet it, according to the credit union. The lot also promises personal attention and employees who care. For those who actually purchase a vehicle, they will receive a $25 gas card.
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The dealership is “modern and new and looks very nice. It's not a small lot with a trailer on it. It's a high-end looking operation,” Gill described.
Having served as president/CEO of City County CU for the past four years, he said his predecessor, Bill Marquardt, had the vision to open AutoBranch. The idea was credit unions had been fighting dealers for control of the car loan, Gill explained. So why didn't City County CU become its own dealer and provide members with a better experience?
The credit union talked to Florida officials and learned the state did not want it to hold a dealer license, Gill said. So, AutoBranch operates with a dealer tenant. It appears seamless to the member, even though the salespeople are employees of an independent used car dealership working under an operating agreement with the credit union. But when it comes to financing, City County CU has its own staff on site.
“You don't have to be a credit union member to shop there. If you’re not a member, you can join because we have a field of membership that allows anyone who lives or works in 43 counties to join,” Gill said. “The business concept is we try to provide all the financing and do the best direct auto loan the way it would be through a branch,” he added. “So, someone who comes in there, gets the same interest rate on the loan they would get if they applied through one of our branches or our call center. The member isn't paying a marked-up rate.”
Gill doesn't have statistics on how many new members decided City County CU was a good deal and opened a checking account or otherwise expanded their relationship. Still, staff is on hand at the used car dealership to handle cross-sell credit cards and other products and services, he said.
If all this sounds easy, Gill stressed the car business is a difficult operation because you’re selling cars, not just financing them. When there's a problem, customers come back with mechanical and other issues and they have a higher level of expectation than they would of a typical dealership.
“It's a great service to provide, and it's very profitable for us. But it's more work to manage than people would assume. It takes a lot of ongoing hours,” Gill explained. “We have to spend time working with people on the dealer side of the business. A lot of it gets very operational in nature – inventory level, the price of cars, reconditioning of cars. There's a big difference between financing the car and selling the car.”