ELGIN, Ill. — The numbers are intriguing, said Jeff Frantz, senior vice president of Lending Solutions, Inc. here. LSI is a leading provider of around-the-clock consumer lending programs to credit unions (http://www.lendingsolutions.com/) and the numbers have given him an idea.
According to Ward-Smith.com, the highest performing credit unions finance just fewer than 20% of their members'auto purchases, Frantz said. "In 2006 those credit unions totaled 464. The remaining credit unions averaged a tad under 15%. That means 80-85% of members are financing elsewhere."
That means that despite getting pre-approved at the credit union, the F&I guy converted the member to another lender. And those who didn't apply at the credit union figured they'd apply after they picked out their car, but they were easy targets for a dealership specialist, Frantz said.
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"The F&I guy's pay is largely commission on financing and ancillaries, so they are great at what they do–financing your members," he said.
The stats on auto lending aren't a sweet spot for credit unions right now, he noted. "Credit union market share of auto loans shrank from 18% in 2006 to 17% in 2007 as researched by AutoCount-an Experian company, he said. "Through November the year-to-date average units sold is at the slowest pace since 1998. And CU economists are of one voice in predicting that things aren't going to change for the better anytime soon, given a weak economy and recession fears. "Is it time to throw in the towel and accept things as they are?" asked Frantz rhetorically. "Heck no! It's time to take your members back!"
Any size credit union can put more auto loans on the books by recapturing members lost or those whom they didn't have a chance at in the first place, he said. Frantz ran some numbers: "Take a $100 million dollar credit union with 15,000 members. If 75% of the membership are car buyers, that's 11,250 members with cars. If 80% are financing elsewhere that's 9,000 lost loans. If your average rollover is 32 months, that's 281 lost loans per month. And you can be sure a good chunk of those loans are at interest rates higher than the credit union will offer."
Frantz suggested that CUs start an auto loan recapture program on a recurring basis. Any one of the three credit bureau providers will monitor the membership base to identify which members recently financed elsewhere. "In most cases, they can back into interest rates so you can target those members that need the most help and best fit your portfolio," he said. Then, contact those members with a compelling offer to save money by bringing their loan back to the credit union."
For CUs without the ability to do the work, he recommends outsourcing as a good option. "Just make sure your contact provider plays in the credit union space, knows lending and can demonstrate sales aptitude. With the average ROI running over 500% and average acquisition costs per loan averaging around $110, outsourcing may be your best bet," said Frantz.
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