Time to Be More Aggressive in Marketing Auto Loans to Members

The sharp downturn in the nation's economy over the last year has allowed credit unions to further establish the important role they play in members' lives. Through this period, credit unions grew auto lending market share from 14.7% in March 2008 to 24% in December 2008.

This trend has continued through the first half of 2009. Credit unions are playing an increasingly vital role in the marketplace by remaining an important lending resource for members as many banks and captives continue to shy away from auto loans. At the mid-way point of 2009, credit unions maintain a 22.5% market share.

Auto loans have traditionally been an integral piece of the credit union lending portfolio, as more than one-third of all credit union loans are auto loans. However, when purchasing a vehicle, credit union members are only turning to their credit unions 30% of the time.

Not only are credit unions missing out on opportunities to provide auto loans to members, they are also at risk of losing members entirely to the competing financial institutions that are financing members' auto loans. To ensure their continued success in serving members, credit unions must be more aggressive in looking to provide auto loans to members.

There are four key success factors credit unions should look to for capturing member loans.

Create member awareness. Credit unions must ensure that members are always aware of the availability of auto loans from their credit union. Leverage all your touch-points with the members to remind them of your auto financing program. Ensure you are delivering a consistent message through in-branch promotions, your Web site, e-mail, newsletters and statement messages.

Gain visibility in auto shopping experience. Industry data suggests 75% of all consumers conduct vehicle research online prior to purchasing a vehicle, averaging almost five hours of research before visiting a dealer. Further, a full 60% of consumers also research financing options online before going to a dealership. Your members are among this group, and most of the online sites they visit are promoting someone else's financing. By providing online auto buying resources to members, and linking dealers in the credit union's network, credit unions can ensure that their members view them as an educational resource and control the member's auto buying experience. The earlier a credit union can get actively involved with its members in the auto buying process, the more likely it is that members will finance their vehicles with their credit union.

Capture lower-risk member loans. Risk mitigation is obviously an important concern in all lending portfolios. To encourage your lowest risk members to finance their auto purchase with your credit union, you may want to have a proactive preapproval program. Either through traditional credit screened programs or through in-branch activities, you can prequalify your best members for auto financing. Credit unions have an ideal opportunity to grow their loan portfolio by marketing to their low-risk members and should actively reach out to those members.

Integrate at point-of-purchase. Engagement in the dealership at the point-of-purchase is essential for credit unions to provide auto loans to existing members. According to J.D. Power and Associates, 87% of consumers finance at the dealership. All your efforts at creating member awareness, creating an exceptional buying experience and targeting your most creditworthy members could be lost if you don't have a strong POP presence. Since the majority of consumers do finance their vehicles at the point of purchase, credit unions must have a highly visible dealership presence.

Capturing member financing is critical for credit unions' continued success in today's marketplace. By focusing on member auto lending needs, credit unions have a great opportunity to grow their loan portfolios.