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RANCHO CUCAMONGA, Calif. – According to Credit Union Direct President Tony Boutelle, the key to making more indirect auto loans is surprisingly simple. Actually, simplicity is the key: make the process as simple, fast and easy for the dealer as possible, Boutelle said. The organization’s mission hasn’t changed much since it began in 1994. At that time, CU Direct pioneered the lender aggregation concept, bringing credit unions together under a common approval platform, making the process easier for dealers, and positioning the credit union cooperative as a major lending option. And as CU Direct grows, simplicity still remains the primary method of reaching organizational goals. The strategy certainly appears to be working. CU Direct is on target for another record-setting year. In August alone, the organization funded $1.8 billion in auto loans, bringing the year-to-date total to $10.33 billion as of August 31. This growth is staggering when compared to 2004 and 2003, both record-breaking years in themselves. In 2004, CU Direct funded $7.06 billion, and in 2003, $4.81 billion. Although the auto lending market typically peaks in August, a conservative estimate of $900 million in new loans for each of the remaining four months of the year puts CU Direct’s 2005 estimated year end numbers at $13.93 billion – nearly double last year’s figures. Why such a good year? Boutelle said it’s a combination of changes within the automotive industry, combined with competitive credit union rates. Earlier this year, automakers introduced “employee pricing” programs that used low prices to sell vehicles instead of low rate or cash back incentives. The promotion method was a success with consumers, reviving the sluggish automotive industry. “Obviously, there’s a lot more cars being sold, which in itself is good for the credit union market,” Boutelle said. For credit unions, the employee pricing programs had a secondary benefit: as low rate incentives were discontinued, so were dealer requirements to finance through automaker-owned captive financing companies. And because captives have fallen upon hard times, they aren’t as competitive as they once were. Additionally, banks have been quicker to raise loan rates than credit unions in response to the rising Federal Reserve rate, Boutelle said. So, once dealers were free to select the most competitive method of financing, CUDL was there with the best deal. And, Boutelle adds, it was simple, fast and easy. “For the most part, dealers are pretty independent, and I think they will continue to use credit unions as long as we make it easy to work with them,” he said. These ideal market conditions are helping CU Direct continue to grow business in established West Coast markets, while expanding into key markets like Texas and Florida, and building business in the company’s Chicago, Boston and Raleigh offices. The company currently has a presence in 39 states, and hopes to expand to all 50 sometime next year. In the west, CU Direct’s market share tops the auto lender list in most markets. In Northern California, CUDL was the region’s top auto lender for the 2nd quarter 2005, funding more than twice as many loans as the #2 lender, Toyota Financial Services. In Nevada, CUDL also topped the 2nd quarter results, with almost twice as many loans as the #2 lender, Ford Motor Credit. The results continue throughout the region, with #1 rankings in Oregon, Washington and Utah. And if managing unprecedented growth and nationwide expansion wasn’t already enough, CU Direct is juggling five major projects this year among only 189 employees: 1. Completing the roll-out of new real-time dealer inventory technology through the company’s existing AutoSMART Web-based product; 2. Completing a year-long effort to upgrade credit unions and dealers to CUDL3, CU Direct’s third generation software; 3. Completing the roll-out of CUDL Complete, which provides back office processing for credit unions; 4. Preparing for a 4th quarter launch of CUDL University, which provides Web-based indirect lending training for credit union staff; and 5. Preparing for CU Direct’s first Remarketing Conference, which aims to educate credit unions to recover as much as possible from repossessed vehicles. The first three initiatives are no surprise: CU Direct made its mark in pioneering technology, and continues to improve technological methods with an emphasis on – no surprise here – simplicity for auto dealers, credit unions and members. The dealer inventory enhancement to AutoSMART provides simplicity for members, as well as an additional sales channel for dealers. It allows dealers to provide photos, options and price information on specific vehicles currently in stock on their lots, which is made available to members through the credit union’s branded AutoSMART site. This differs from the traditional method of having the member specify desired make, model and options they are looking for. CU Direct would submit this information to dealers, who replied with bids if they had that specific vehicle in stock. Now, members can shop online by viewing which vehicles dealers have to offer. A pulling company that extracts dealer inventory right out of dealer databases electronically updates AutoSMART inventories each day. “Right now, we’re very encouraged because dealers are signing up like crazy, and a lot of credit unions are marketing it already,” Boutelle said, adding, “But we’re going to do more marketing to credit unions to get them on board.” The phrase “system upgrade” is enough to make anyone in the industry break out into a cold sweat, but Boutelle reports that with CUDL3, so far, so good. About half of all auto dealers have moved over the new platform, and about three-quarters of credit unions have completed the upgrade. “We want everyone on new platform by end of this year, and we’ll be introducing new enhancements for CUDL3 next year,” Boutelle said. New CUDL3 advances support the simple and easy battle cry: the ability for dealers and credit unions to communicate electronically, rather than by using faxes; real-time information regarding the status of loan applications; and, dealer alert indicators for special notifications such as a funding delay or a new message from the credit union. Boutelle was particularly proud of CU Direct’s first ever Remarketing Conference, scheduled for November 2-4 in Atlanta. Repossessions have long been a thorn in the side of credit unions that participate in indirect lending programs. However, Boutelle doesn’t blame the method, just the numbers. “That’s just the nature of auto lending – you’re going to be faced with repossessions,” he said. “Credit unions that are getting higher volume than ever before will inevitably get more repossessions. What we can do is help them figure out a way to maximize their returns,” he said. CU Direct contracted with Manheim, the world’s largest auto remarketing company, to provide training at the conference and work with credit unions to help sell repossessed vehicles. “They’ll be putting in a credit union lane at their auctions across the country,” Boutelle said. The conference will be held at Manheim’s training center in Atlanta, and features some of Manheim’s top brass as speakers. “Talk about high-tech training, each attendee has a computer in front of them, in a theatre with a state of the art speaker system, and the speakers are the top in the industry – we probably couldn’t have found a better training environment,” Boutelle said. As for the near future, Boutelle predicts another banner year for indirect auto lending. “I don’t see that captives will be able to get out of their high cost of capital in the short term, so next year should also be a pretty good year for credit unions to make auto loans,” he said. -

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