FLINT, MICH. - Detroit carmakers aren't the only ones enjoyingthe benefits of their latest incentive program to boost car sales.Several credit unions are also seeing the seeing the rewards of the"Employee Discount for Everyone" promotion in the form of increasedindirect auto loan volume. General Motors reportedly increased itssales of new cars and light trucks by as much as 47% in June afterintroducing its Employee Discount for Everyone plan. Ford and theChrysler division of DaimlerChrysler launched similar programs July1. Will McGregor, general manager, Indirect Lending TechnologiesLLC says he was a bit nervous when GM first announced the pricingincentive about the effect it would have on credit unions' indirectlending portfolios. The Salt Lake City-based company owns andoperates an Internet-based indirect lending system and primarilyserves the credit union market. The company has relationships withabout 50 CUs throughout the U.S. and several CUSOs, as well as hasa co-marketing agreement with the Michigan, Idaho and Montanacredit union leagues. He says when he looked at the company'snumbers May-July, he was a little surprised. "Of those creditunions on our system that do both new and used cars, the percentageof new cars financed, as a percent of total cars financed, grewfrom about 60% in May to about 71% in June. So far in July it'sabout 73%." McGregor opines that while the employee pricingincentive "is a great deal for the Big 3 manufacturers, thatdoesn't mean they're getting all of the financing business."Financial Plus CU, located in the heart of Big 3 country - Flint,Mich. - is proof of that. Even though the majority of the $250million CU's 35,000 members are GM employees, the credit union hasseen tremendous gains in its indirect lending portfolio since June.David McGrain, vp of marketing, Financial Plus CU says the CU'swinning formula is focusing its attention on building dealerrelations to shore up its indirect lending portfolio which itsmanaged on its own for several years and currently makes up about39% of Financial Plus' total loan portfolio. In 2003, FinancialPlus did 1,125 auto loans worth a little more than $19 million; in2004 it funded 1,551 auto loans worth $25,585,651. By July 25,Financial Plus had funded more than half the indirect loans -966totaling $15,248,084 than it did for the entire previous year. Thatgain was fueled by the surge in indirect loans the CU did in June -166 loans worth $2,809,230 - and in the first three weeks of July-158 loans for $2,599,888. It would be easy to say Financial Plus'field-of-membership gives it a head start in the Employee Discountfor Everyone program - although it's had a community charter sinceSeptember 2002, it was previously an occupational credit union thatcounted most of its members as GM employees. Even now, McGrain saidthe majority of Financial Plus' membership are GM employees who areeligible for a discount even without the auto manufacturer'sincentive. Still, McGrain says auto loan funding through the creditunion has never been guaranteed. "It all comes down to therelationship with the dealership," he stresses, adding that thecredit union didn't do any special marketing campaign to attractthe loans. Financial Plus has relations with 70 dealers, and "eventhough a lot of our members have an employee discount, the dealersstill got a significant increase in volume, and we were able tocapture a lot of those loans." Consider these statistics McGraincites: while GM saw a 41% increase in June sales compared to May,Financial Plus saw a 38% increase in vehicle loans financed."Regardless if the majority of our members are GM employees andhave a loyalty to the manufacturer, the dealership is still thedriving force behind financing. More precisely the F&I personat the dealership, and whether they give you the loan or notdepends on the commission you pay. That's the driver. With ourrates, we're not trying to match what GMAC or the large banks arepaying the dealers, we're competitive," he explains. McGrain addsthat Financial Plus doesn't preapprove members for auto loansbecause "the F&I person will make their decision on who to givethe loan to regardless if we pre-approve the member. In the creditunion indirect lending industry, the dealer F&I person is inthe driver's seat for financing." The best rate the credit unionhas been offering on new or used vehicles is 4.5%. It also doesrisk-based lending. "It's really in the F&I person's hands.Dealers are concerned with getting the loan financed before theconsumer changes their mind about buying the vehicle and gettingthe buyer to drive the car off the lot. The consumer wants to knowwhat the monthly loan payments will be and can they drive thevehicle home. That's why the relationship with the dealership is soimportant, that's why when they send the financing application outto multiple lenders it's so important for us to turn it aroundquickly," says McGrain. Speed and dealer relations are essential inthe indirect lending business, McGrain emphasizes. -

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