SAN BERNARDINO, Calif.-Faced with mounting inventory of repossessed automobiles and receiving just pennies on the dollar at auctions, Arrowhead CU has formed a partnership with a shuttered local dealership to get more value from its repos.
Gene Shabinaw, Arrowhead CU's senior vice president of lending, told Credit Union Journal although the new venture will be known as Arrowhead Motors, it is not a subsidiary or CUSO of the credit union-the name appears frequently in this city just a few miles from Lake Arrowhead.
"In this economy, as everyone is realizing, it is difficult to sell repossessed automobiles and obtain any type of price at auction," he said. "Also, the quality of repossessions we are receiving today is changing. They used to be beaten up and driven into the ground, but now we are receiving voluntary repossessions because members realize they can't make the payments. These cars are in pretty good shape, so selling them for reduced prices at auction doesn't make sense."
The Empty Lot
Shabinaw said a longtime member of Arrowhead CU by the name of Jerry Atkinson is someone well known to the credit union's management by virtue of owning an auto dealership here for 30-plus years. Unfortunately for Atkinson, his dealership recently went out of business. But Shabinaw looked at the empty lot and came up with an idea to help both sides.
"We got together with him and made an exclusive relationship," Shabinaw explained. "We provide vehicles to Arrowhead Motors, and they provide mechanical and safety services toward getting the vehicles ready for sale-such as new tires, brake jobs, removing dents and paint touch-up."
The auto lot was taking in inventory at press time. Once the operation is ready for business, Shabinaw said Arrowhead CU will maintain title on the vehicles until they are sold, and it will have an employee on the lot to monitor inventory, handle paperwork on the repossession and the notice of intent, do condition reports, track sales, and coordinate between the dealership and the credit union to transfer title, secure funds and pay off the loan.
"You can't put just anyone into this position," Shabinaw observed. "We had a rather large indirect loan program that we scaled back, and the person we are putting into this position has been in the auto dealership business for years."
Arrowhead CU will reduce its transportation costs with the new venture, because instead of driving autos from auction site to auction site, vehicles that can be reconditioned for a minimum expense will be delivered directly to Arrowhead Motors upon repossession. Vehicles will stay in a storage area until their 15-day notice of intent to sell has expired, and then they will move to the front lot where the public may examine them.
Arrowhead Motors has created a website that displays all inventory available for sale and gives directions to the lot. Shabinaw said Arrowhead CU's website will have a link to Arrowhead Motors' site.
In addition to repossessed cars and SUVs, RVs and boats will be offered for sale.
"This was a win-win situation for everybody involved," Shabinaw declared. "Arrowhead Motors had a facility and needed inventory. We had inventory and needed a facility to liquidate, and we needed someone with integrity. We also needed a place where we could recover the loss if we suffer a repossession. If we can sell it at retail it helps the credit union by reducing losses, and it helps our members who have their cars repossessed because they have less liability to the credit union."
Bringing Back A Dealership
"From the community's standpoint," he continued, "there is an area in town where several dealerships have closed, which lowers tax revenue to the city. We will bring back a dealership, which provides jobs and sales tax income to the city."
Because the vehicles previously were being sold at auctions where only dealers could access the inventory, they had notices of intent to sell at private sales. Cars in the process of being delivered to the Arrowhead Motors facility are being redisclosed as public sales, meaning new 15-day clocks must be started.
"We expect things to be up and running in two weeks," Shabinaw said on March 10. "We are excited about it because it is going to improve performance on vehicle liquidation, which has been really bad at auctions-especially with RVs."
