Kitsap Community Federal Credit Union is reporting it has booked $100 million in loans from automobile dealers in the past two years -due in large part to having hired people who understand the market.
Two of the people behind Kitsap's program are Jeanette Hughes, vice president and manager of dealer financing, and Brett Jorgenson, senior vice president of lending. Hughes and Jorgenson told The Credit Union Journal familiarity with the market and thorough research are the keys to Kitsap's stellar loan numbers.
"We're competing with major financial institutions for those contracts," said Hughes, who formerly worked for Bank of America for 19 years; 14 of those in B of A's dealer financing division handling accounts in Washington, Oregon and Idaho. "Brett and I have experience working with dealers. You have to monitor each dealer's credit quality, while being flexible and offering great service."
"We do things like make calls and deliver checks - things other financial institutions are moving away from," she added.
According to Jorgenson, CUs frequently have been burned by dealer financing partly because they try to hire "inside" people who don't fully understand the landmines that are hidden in the world of point-of-sale lending.
"They need to go outside, hire someone who is experienced and knows the market," he said. "They have to track dealers, because credit quality varies from dealer to dealer."
Kitsap prices its loan rates competitively with other financial institutions in the Bremerton/Seattle area, but the credit union closes many loans thanks to the local service it offers, Jorgenson asserted.
Relationships Pay Off
"We have relationships with dealers, and in most cases we are the primary relationship with these dealers. We don't have to wait for dealers to shotgun a loan application - where they put the application on a fax machine, send it to five or six lenders, and the first to call back with approval gets the deal," he said.
Jorgenson advised credit unions to track the number of loans they approve, as well as the number they book. And he further cautioned not to get too caught up in beating the rates banks offer, especially in the category of risky borrowers. "They don't want their 'D' rates to be too good, because then they will get all of the 'D' loans," he said.
As a community CU, Kitsap has an additional advantage, Hughes explained. In the CU's territory-which includes Kitsap County and parts of two other counties on the Olympic Peninsula-30% of households have at least one member.
"Just about anyone who walks into a dealer in the local area is eligible. Fifty percent of our car loans are from new members," she said.
The credit union was founded in 1934 in Bremerton's U.S. Navy facility as Navy Yard Metal Trades CU. In the 1980s, it took the name of the local county, and soon after switched to a federal charter. Today, Kitsap Community FCU serves 67,000 members and has more than $513 million in assets.