Driving Future Auto Loans

This is bonus coverage from “Lending 2020” in the January 2015 issue of Credit Union Management magazine.

Between 2015 and 2020, the auto lending marketplace faces a far-reaching transformation, with planned and unexpected changes in regulations, consumer trends, the economy, and technology all playing a role.

To meet current and long-term goals, credit unions need a long-term strategy that helps drive more auto loans. This strategy must be designed to give CUs a competitive advantage over banks and other lenders vying for consumer loans and loyalty. It also needs to take into consideration the entire auto shopping and buying process, the significant presence of young people in the car-buying market, and trends in remote service delivery--especially mobile.

The Lending Landscape

Credit unions face an increasingly competitive auto loan marketplace. CUs captured 24 percent of all auto loan originations in Q3 2014 according to research from Experian; they continue to increase their market share, with auto loans comprising 31 percent of their total portfolio, according to data from Callahans. However, banks still hold 38 percent market share in the auto lending marketplace to credit unions’ 19.5 percent, finds Autocount.

The Internet and mobile are transforming auto shopping by giving buyers the ability to research models, prices and inventories—across multiple devices—long before setting foot on a car lot. With smartphone apps, buyers can check book value, prices and availability during final negotiations.

Notably, JD Power’s Power Information Network finds that Generation Y represents more than 25 percent of all retail autosales and predicts it will represent more than 40 percent of all vehicle purchases by 2020. The ability to be always connected and always consuming information presents implications for marketers and lenders alike.

The Car-Buying Experience

Today’s shoppers often consider shopping, buying and financing a new car as a single experience. So credit unions that want to help shoppers will do well to provide tools that take consumers through every step of the process.

“We are committed to offering convenience to our members, and one way to do this is with pre-approval through the AutoSMART tool,” says CUES member Andrea Pruna, VP/marketing at $1 billion Northeast Credit Union, Portsmouth, N.H. AutoSMART is an auto shopping website that CUs can brand and customize as part of their own site for members. The product provides research and shopping tools, plus access to over 1.5 million vehicles

Importantly, AutoSMART encourages and enables shoppers to apply online for loan pre-approval. “Once the member selects a car, the partner dealer can pull out the loan pre-approval from their system, making it a faster experience for all involved—and our members love it,” she notes.

AutoSMART will help the CU reach young car buyers, too, Pruna thinks.

“Capturing more members of the growing Millennial demographic is definitely one of our long-term goals,” says Pruna. “We have the CUDL AutoSMART mobile app customized with our credit union branding, and obviously the younger demographic are more inclined to use it, though it’s been well received by everyone.”

Armed with a pre-approval, consumers still need to finalize their deal.

“With AutoSMART, our members have the tools to build and price their new vehicle,” says Marcus Wertz, VP/consumer lending for $518 million Greater Nevada Credit Union, Carson City. “Now, AutoPREMIER closes the circle for today’s auto buyer, connecting them with a CU partner dealership that will give them the best deal. It expedites the car buying process and takes a lot of the stress out of it, making for a more enjoyable experience.”

AutoPREMIER concierge service offers car buyers a haggle-free pricing experience on new vehicles and special purchase incentives on pre-owned cars.

How does this work? Dealers pay a nominal monthly subscription fee for being a preferred dealer on the AutoPremier program with CUs in their area. CU Direct partners with the credit union to identify key local prospect dealers, signs them up, trains them on the concierge program, and then monitors their pricing, quality of service to the CU.

AutoPREMIER provides a one-on-one advisor from CU Direct's call center who guides the buyer through the entire experience, from helping evaluate makes and models to connecting with a local “no-haggle, no-hassle” dealer, arranging a test drive and explaining the finer points of financing.

The member gets a great rate and full-service experience, while the credit union gets the loan,” notes CUES member Kerstin Plemel, VP/marketing for Greater Nevada CU. “It’s good for the member, and it’s good for the credit union, too."

It’s also important for strengthening the dealer relationship. “I think partnering with dealers through AutoPREMIER enhances that relationship where you’re showing them that you trust them, that you want to refer your members to them to purchase a vehicle, and seeing that reciprocated when the financing comes back through Greater Nevada,” Wertz says.

In fact, within less than six months of implementing AutoPREMIER, Greater Nevada CU noticed an increase in look-to-book ratios, as well as a loan volume increase on the indirect side.

“I would attribute that to AutoPREMIER, which helps us to retain membership loans and not lose them at the dealer,” says Wertz.

Northeast CU and Greater Nevada CU are great examples of CUs well poised to drive future auto loans. The auto lending strategy they have in place considers the whole car-buying experience, the importance of reaching members of Gen Y and the explosion in mobile delivery of service. We’re looking forward to seeing them triumph over competitors.

Bill Meyer is corporate communications/public relations lead for CU Direct, Ontario, Calif.