How many times have you found yourself in a conversation on a plane, at a banquet, or child's soccer game, and you are asked what type of work you do? Your answer, "I work in the credit union industry" usually leads to the same enthusiastic response "I have a great auto loan from my credit union." I'm sure this scenario has been repeated numerous times throughout the country, and since credit unions are well known and highly regarded by many for their comparable auto financing, it's easy to see how members and consumers relate this valuable service so closely with the credit union brand. While auto financing has traditionally been a mainstay product for credit unions, currently, according to Callahan & Associates' 2002 Auto Lending Research Study, comprising more than 40% of their total loan portfolio, the marketplace has grown intensely competitive and future growth in this area could become difficult to achieve. The proliferation of manufacturer-sponsored low interest rate promotions (0% financing) and the aggregation of other lenders – banks and captives – to offer auto dealers easy access to auto financing on a common Web-based platform, are among the factors that have had a significant impact in the auto lending marketplace. Additionally, the increase in new mortgage loans and refinancing volume due to record low interest rates, has led to real estate loans garnering more focus and attention than auto financing. As a result, credit unions have had to re-evaluate their performance, streamline internal processes and change their business practices in order to effectively respond to these changes in industry trends and overall economic climate. Although much of the current financial lending market is focused on real estate, credit unions realize that this trend is unlikely to continue at this accelerated pace and auto lending will continue to be a consistent and vital product. Credit unions have responded to the competitive challenges in the auto-lending arena by identifying new growth opportunities and developing the strategies and tactics needed to acquire new business, increase market share and enhance communication with members. Two areas that have been recognized as ideal areas for credit unions to capture new auto financing contracts, and expand their membership base are indirect lending programs and Internet based services. Since J.D. Powers & Associates 2002 research indicates that more than 84% of all auto-financing consumers are arranging auto financing at the dealerships, credit unions have come to realize the importance of having a convenient method for their members to have access to their financing at the point-of-sale. Additionally, with more credit unions beginning to service broader communities, an informative Web site and e-commerce capabilities can provide the opportunity to offer new members credit union benefits while extending their reach and impact on the communities they service. Many credit unions have successfully managed to maintain and grow their auto financing market share in this intensely competitive marketplace by implementing indirect lending programs. Credit unions collectively account for 16% of the total U.S. auto lending market, J.D. Powers & Associates 2002 research shows. By working together with a variety of auto dealers and operating on one lending platform offered through a CUSO, indirect lending programs are an aggressive and cost effective way for credit unions to compete and produce positive results. With the use of these programs coupled with their brand recognition and reputation as a preferred financing institution, auto lending becomes a marketing tool credit unions can use to heighten their exposure to non members. According to a recent study conducted by Callahan & Associates, credit unions participating in indirect lending had a higher loan growth for new and used automobiles. During the past year, dealer based indirect lending sources have generated an average of 28% of new auto financing for larger credit unions (over $50M in assets), with the majority of them gaining over half of these loans from non-members. While smaller credit unions (less than $50M in assets) may not have the resources to allocate to large indirect lending programs, they have recognized that potential auto lending ventures could gain from such offerings. An informative and easy to navigate Web site can also help enhance a credit union's auto lending brand image. Web sites and links to other online auto buying resources such as Kelley Blue Book, NADA, Chrome (automobile configuration data), and manufacturer's rebate information, are outlets credit unions can utilize to raise their visibility and exposure with potential and current members who may visit the credit union site while searching for new or used auto lending information. By having a Web site that offers these services and links, credit unions have the basic technical ability needed to integrate key stages of the auto loan cycle while providing added communication to their members. Auto lending is also important to credit unions because it is an opportunity for them to introduce and offer related products and services that will assist their members in other financial areas. During the auto financing process, a number of credit unions have been successful with credit card cross sales in addition to products and services such as Credit Life/Disability, GAP Insurance and mechanical breakdown insurance. Auto lending continues to be an important product for credit unions as it provides a lucrative revenue stream, opportunity to expand membership base, as well as, an outlet for additional marketing activity. By focusing on improving their technology, internal processes, product and services offerings, and strengthening relationships with auto dealers, credit unions can continue to build their brand, image and reputation as a preferred auto lending institution.

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