BOX ELDER, S.D. -- Shirley Stover's initial idea was forSentinel FCU to just buy its own car dealership so it could offermore car choices and better deals to the soldiers at Ellsworth AirForce Base here. But Sentinel FCU, a $48 million-in-assets CU,couldn't afford that, CEO Nancy Ellwein told Stover, so she startedthinking again and came up with the idea of renting a cardealership. Or at least space in one.

Stover, Sentinel FCU's (www.sentinelfcu.org) senior vicepresident of lending, wanted something that would counteract thedownsides of indirect lending. Sentinel FCU paid dealers $80,000 inindirect fees in 2006, she said, and lost a lot of add-on business.And after spending 10 years of her career in a car dealer's financeand insurance office she knew every trick of the trade, she toldCredit Union Times.

"We allowed the dealers to sign up new members and that wasgreat, but the credit union didn't have a strong enough program inplace to mine those new accounts for additional services. Once theloan was paid off, the new member left the credit union. If thepersonal finance officers preapproved a loan and the member went tothe dealer, the dealerships F&I department would talk them intodoing the loan with them, and we were still paying the dealer thefee," she said. "Then the dealership's F&I department also gotthe opportunity to sell the back-end products, like Gap andmechanical breakdown coverage and even credit life and creditdisability coverage. We weren't getting the chance to sell thoseproducts even though what we had to sell was better for thesoldiers. We needed the members in our chairs."

So Stover found a way around it and had the full support of MattGluhosky, head of the loan department. "I went to Kopren Motors, adealership right outside the main gate and did a deal with them.Now, they're happy and we're happy too." After first opening onFeb. 11 with a grand opening in the first week of March, thenew-style partnership of Kopren Motors/Sentinel FCU sold five carsin a matter of weeks, and Stover reports that they'd just deliveredthe sixteenth used car deal. "We financed 14 of the 16 and sold Gapon 13 of the financed deals. So we are rocking and rolling." Thegrand opening advertised 3.99% financing for the first 20 cars soldno matter the credit bureau score. In the first month, 16 unitswere sold for $131,000, and nine new credit union members gained.All this despite an opening-week blizzard.

"We killed a few birds with one stone," she said. "We feel thatwe do owe the military something as we're right here on base, andthese soldiers need vehicles, and many don't make a lot of money.Some even have credit that's not so good. We wanted a way to givethem what they needed even if it's not what they dream of. Someonehas to teach them that they should crawl, then walk and then run,financially speaking, I mean."

First Sergeants Led The Way

Stover said she met for breakfast monthly with the "firstshirts," slang for the first sergeants on base and always asks whatSentinel can do better, how the CU can help. "Well, once they said,payday loans, our guys are getting into trouble with paydaylenders. So we came up with a payday loan product. So I told thefirsts about this idea and they loved it! Now, they can't tell thetroops where to go for a car or even a car loan, but if thesoldiers ask, they tell them to go to the credit union," Stoversaid.

Stover explained that Kopren Motors supplies the salespeople andthe cars and the CU supplies an employee for the F&I office (aretired military veteran named Kelly Kasulas). They shareadvertising, office expenses and utilities. The dealer must alwayshave at least 10 cars available in a price range of $7,000-$10,000that are decent cars that look good. "These soldiers don't wantGranny cars, they like eye candy cars," Stover said. But neitherdoes she want soldiers lusting after $25,000 Camaros and Firebirdsto get in over their heads with loans they can't afford.

"First they establish their credit, get a nice, solid car, paythe loan, maybe get a raise the next year. Then they can turn it inand get a newer car--but it can't be start at the top and work yourway down, it has to be start at the bottom and work your way up!"The dealer has also agreed to locate any vehicle that a potentialcustomer might want. Stover believes firmly that part of the creditunion's responsibility is to educate members about making prudentfinancial decisions. She takes that responsibility to heart,particularly because so many members are soldiers serving theircountry. And everyone at Sentinel FCU associated with this effortfeels that way too, she said.

Pursuing that philosophy also affords the ability to open upaccounts, do all the financing and sell the back end products. "Wecan cross sell and up sell our checking accounts and Visa cards. Infact, any product we have will be cross sold." As part of theagreement, Sentinel no longer pays a fee to the dealership but doespay the dealership a small commission on the sale of the add-onproducts and its employee an hourly wage.

Stover's experience in car lending also paid dividends in seeingwhatever mines might lie hidden in the field. "We centralized ourunderwriting so that all indirect lending and our dealership loanapplications will go through the underwriter for approval ordenial," she said. "That way the personal financial officer at ournew dealership will not be approving their own loans. Thecentralized underwriting will make our auditors and EEOChappy."

"I did my due diligence and approached a used-car dealership,"said Stover. "I knew that a new-car dealership probably wouldn'twork because of the franchise part. We also have an ATM alongsidethe building that takes deposits, and together with our employeebeing able to open up accounts and make loans, it's like anotherbranch location." The whole concept took a year from idea tofinished reality. Finding a lot, signing contracts, working out allthe details.

This idea won't save Sentinel the entire $80,000 because theystill do indirect lending with other dealers, but Stover said thatif it sells enough cars, they won't be so dependant upon the otherdealerships. And they will be in a position to tell the otherdealerships that they can still send deals to the CU but that theywon't be paid for them anymore. The best part is that SFCU will beselling products and forming the relationships that make for alifetime bond with a credit union. Stover said she sees no reasonwhy this idea can't be duplicated by other credit unions.

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