LAS VEGAS - The skyrocketing price of gasoline has put a serious crimp on credit unions’ traditional bread and butter–car loans–but some are suggesting there are still opportunities for CUs in this market.
The key is for credit unions to take advantage of credit troubles at other auto lenders to recapture some lost market share while also looking to independent car dealers for new opportunities, according to Credit Union Direct Lending.
Tony Boutelle, CEO of the Rancho Cucamonga, Calif.-based provider of indirect and point-of-sale lending services for CUs, told Credit Union Journal 90% of new car financing takes place at the dealership, which gives the movement a clear target and focus.
“Financing at the dealer had been in the 80% range over the last two decades, and has gone up,” he explained, adding, “The whole marketplace has turned on its head. Dealerships don’t have the right inventory as things are changing and people want smaller, more fuel-efficient cars.
“The one thing that hasn’t changed is auto lending is primarily done at the dealership,” Boutelle continued. “If there is a ‘brand’ credit unions have it is auto lending. Many people have gotten an auto loan from a credit union at some point in their life. Members are still getting loans, so credit unions can focus just on their members if they wish. To do auto loans, credit unions have to do so at the dealership.”
But even as credit union auto lending market share has been shrinking over the last two years (see related chart, page 15), credit unions could see some pick-up as dealers find some of their favorite lenders aren’t in a position to make loans, according to Jerry Neemann, CUDL’s EVP and chief sales officer.
“Manufacturers and lenders are having a hard time, but it is a great opportunity for credit unions,” he told Credit Union Journal. “Many dealers are finding their way back to credit unions as a consistent source of funding as others have had liquidity problems.”
Joe Greenwald, CUDL’s vice president of marketing and communication, agreed that the “credit crunch” will open the door for credit unions.
“Over the next year, we see a potential to grow loans,” he told CUJ. “While other lenders have been aggressive in acquiring loans, they are starting to retreat a little. They are tightening up their lending criteria, and they don’t have as much to lend out. This is pushing opportunity back to credit unions.”
According to Greenwald, the price of gas is just one of a number of factors driving auto sales statistics down. It is a significant one, however, as consumers are switching from SUVs to more fuel-efficient cars.
“In spite of the economy, we are seeing a lot of good things,” assessed Greenwald. “Credit unions are doing a lot of creative things. The economy has been bad, but it hasn’t stopped credit unions from going forward.”
A Return To Roots
Greenwald sees CUs as returning to their “roots” as they have turned their attention to member lending at the point of sale, rather than using POS as a member acquisition tool.
According to Boutelle, CUDL is reminding credit unions they need to be at the point of sale, whether they are targeting existing members or new members.
“We have programs to help both of those,” he said. “There is less volume out there, but credit unions have a great opportunity to capture a bigger percentage of it. The captives have very expensive cost of funds, which is a big advantage for credit unions. They don’t have the problems a lot of banks and finance companies have.”
He directed the movement to use technology to its advantage.
“We are trying to emphasize marketing existing members,” he said. “Some 75% to 80% of people who are in the market for cars are going online for their initial research. Most auto sites have a financing info page, and that is bank financing.”
Taking Back Control
CUDL is urging credit unions to “take control” of the process and drive members to their own car sites–which in turn will drive loans to CUs, he said.
“CUDL AutoSmart is a website that offers research we think is robust. Credit unions can customize the site with their logo, their colors and even their dealers. So now it is their website,” Greenwald warned. “If credit unions link to a generic auto site, then those members are just two clicks from bank financing.”(c) 2008 The Credit Union Journal and SourceMedia, Inc. All Rights Reserved.http://www.cujournal.com http://www.sourcemedia.com
