BOX ELDER, S.D. - One credit union has taken the “if you can’t beat ‘em, join ‘em” approach by opening a financing office inside an auto dealership.
“Sentinel Federal and Kopren Motors are offering a fast, simple and convenient way for customers to shop for pre-owned quality vehicles and finance those vehicles at the same location,” said Shirley Stover, vice president of Sentinel FCU. “This is a unique opportunity that will benefit the surrounding community as well as our current members.”
In all, it took about one year between the idea was conceived until the grand opening of the dealership, planned for this week.
“It has taken one year to put together, find a lot, sign contracts, work out all the details,” Stover said.
Stover said she came up with the idea for this partnership after learning that the credit union paid dealers $80,000 in in-direct fees in 2006.
“We allowed the dealers to sign up new members, and that was great, but the credit union did not have a strong enough program in place to mine those new accounts for additional services,” she said. “Once the loan is paid off, the new member left the credit union.”
In addition, Stover said, if the loan officers pre-approved the loan and the member went to the dealer, the dealership’s finance department would convince the member into doing the loan with them, and the $6-million credit union was still paying the dealer the fee. The dealership’s finance department was also getting the opportunity to sell back-end products, Stover said.
“The credit union can sell those products but we were not getting the chance,” she said. “We needed the members in our chairs. So, I thought, there has to be a way around this. I could recommend buying a dealership–we didn’t have the money to do that.
“So how about if the credit union goes into partnership with an already-established dealership,” Stover thought. “The dealership would supply the salespeople and the cars, the credit union would supply the employee for the F&I office. We could share advertising and the expense of the office and utilities. The credit union would then get the chance to open up accounts, do all the financing and sell the back-end products. We can cross sell and up-sell our checking accounts and Visa cards. In fact, any product we have will be cross sold.”
As part of the agreement, the credit union will also no longer pay the fee to the dealership.
“We are going to pay our dealership a small hourly wage and spiff on the sale of the products,” she said.
The new partnership is not going to save the credit union the entire $80,000 because it will still be doing in-direct lending with other dealers.
“But if our car dealership sells enough cars, we will not be dependent upon the other dealerships and we will be in a position to tell the other dealerships that they can still send us deals but we are not going to pay for them anymore,” Stover said.
So that the CU’s loan officers at the new dealership will not be approving their own loans, the $47-million Sentinel FCU has centralized its underwriting so that all indirect lending and dealership loan applications will go through the underwriter for approval or denial.”
The partnership is ideal for the 8,000-member Sentinel FCU, Stover said, because it is a military credit union with a community charter.
“We have very young troops that come to town and get put into a car they cannot afford,” she said. “Our dealership is going to have at least 10 used, economy vehicles, at a good price and considered ‘eye candy’ on the lot.”
Stover said that because she was in the automobile business for 10 years before joining the credit union, she knows which dealerships are honest, and “which ones to watch for.”
“I did my due diligence and approached a used car dealership,” she said.
The dealership and financing office will be open Monday through Friday from 9 a.m. to 6 p.m., and Saturday from 10 a.m. to 2 p.m. A 24-hour ATM is planned for the lot in the coming weeks. There will be one CU employee based at the dealership.
“Our employee can open up accounts and make loans,” Stover said. “It will be like another branch location.”
MORE
To read more about this topic use member feedback at cujournal.com and searching the following bolded terms in the archive:
For info on this story:
* CU Finds Success After Opening Its Own Auto Dealership
* Kicking The Tires On AutoBranch’s Operation
