How a changing auto lending landscape is altering CU-dealer relations
As the way people shop for cars evolves, how is the relationship between auto dealers and credit unions changing? At CU Direct’s recent DRIVE conference near Dallas, a panel of four car dealers shared their views on the latest trends, and how CUs can improve communication with dealers.
The panel first was asked, what is new in digital retailing? What should CUs be doing right now?
Ralph Larson, finance director for Dick Hannah Auto Group, Portland, Ore., said consumers are using the online channel to negotiate the transaction.
“By the time the customer gets to our physical address, everything is pretty much done,” he reported. “In the Northwest, CUDL and our regional network are pretty savvy with applications and funding us fast. We try to be as leading-edge as we can. The days of coming in, kicking tires and driving five or six different models are done.”
According to Larson, speed of the transaction is at the forefront. “People have done their shopping before they come to us. From a finance perspective, we do not have as long as we did a few years ago. Once they get to us the clock really is ticking. Every customer is in a hurry. Time is paramount. If I can have one approval instantly, but I have to wait 30 minutes for another one, I’m going to go with the first one.”
Andy Crews, president and CEO of Autofair Auto Group, Manchester, N.H., said his stores work with a handful of companies online. “Once a person enters that process there are hurdles. The financial institutions need to be engaged in the process. Give us parameters so we can make a decision. Credit unions need to understand how important it is in our business to turn over inventory quickly.”
Danny Cox, senior director, F&I for the Ken Garff Auto Group, Salt Lake City, Utah, told the audience there is a “big focus” is connecting the online shopping experience and the showroom experience seamlessly.
“If they already spent time filling out a credit application online, they don’t want to do all that again,” he said. “There are third-party companies that have off-the-shelf solutions. We want to present customers with different options.”
Kara Brinley, vice president and general manager for Penske Motor Group, Prosper, Texas, noted the online shopping experience allows some car buyers to skip the showroom entirely.
“People are doing the whole buying process online, and then we take the car to their home or work,” she explained. “Some consumers do their test drive on YouTube. The most important thing is to make it seamless. Speed is also important, because 20 minutes is an eternity when waiting for an approval for funding.”
Changes down the road
Jim Treece, news editor for Automotive News magazine, and moderator of the panel, predicted new car sales in 2018 will be down from a very high level in 2017, but used car sales will be up.
“Things are good, but there are always disruptors coming down the road,” he said.
One example of a potential disruptor for the auto business is subscription services as opposed to the current owner or lessor model. Treece said it is possible consumers will subscribe to a dealership that works with several different models – allowing them to use a fuel-efficient economy car for commuting to work on weekdays, an SUV for a weekend camping trip, and then a pickup truck for moving something.
“Someone is still going to have to sell it and finance it,” Treece said. “The key to the future is how well we serve consumers. Consumers are getting more and more comfortable doing more and more online. The millennial that can get a mortgage in 30 minutes will not want to wait two hours for an approval at a dealership at 8 p.m. She will want to start the process online, at her convenience.”
Treece asked the panelists how credit unions could be a better partner, and what goes into a good relationship?
Cox from Ken Garff Auto Group in Salt Lake City said CUs that “get it” walk in the doors ready to help.
“Understand your customer, the finance manager,” he advised. “Understand the pressures they face on a daily basis, how cash flow works. I tell our people to sit down and have a conversation with the people from credit unions so we can understand them and help each other out.”
Brinley from Penske Motor Group in Prosper, Texas, said, “Relationships are built on trust, shared growth and understanding that people want speed.
“Know what somebody at the dealership requires,” she offered. “Know that people are shopping on Memorial Day or at 11:30 at night. We can’t work with a credit union that closes at 5 p.m., just as people are going car shopping.”
Larson from Dick Hannah Auto Group, Portland, Ore., told CUs they indeed need to spend time with the finance manager at a dealership, but also the management team. “Get to know the front of the house,” he said.
Treece asked the panelists to provide one takeaway for credit union lenders to know about dealers and dealerships:
Cox: “Understand the program, and understand the need for speed.”
Crews: “Communication is key. Everything needs to be clear, especially in indirect lending. Understand that our margins have shrunk. Communicate before there is a problem, not after.”
Brinley: “Invest in technology to help us speed things up. The easier it is, the more people will come back, which in turn creates more business.”
Larson: “We are constantly looking at every way we can make a car deal happen. Don’t tell me what you can’t do, tell me what you can do. Realize that we all are trying to do the same thing. Give us some sort of way to go.”