RANCHO CUCAMONGA, Calif. - Tis the season to be shopping-but generally not for cars. What's the right strategy for credit unions when the bread and butter of auto lending takes a holiday?
Several auto industry and lending experts told The Credit Union Journal that a credit union shouldn't become alarmed or cook up a sudden yuletide marketing blitz to nab those winter-time car buyers. The real key, they said, is to have a solid, year-round auto-lending program that acknowledges the December dip and allows staff to prepare in advance.
Credit Union Direct Lending EVP Jerry Neemann said auto lending is a key component of any credit union's portfolio and that while car sales dip in the last fiscal quarter, it's something to expect from December to December.
"It's consistent. You don't see a massive drop off," Neemann said. "It's a seasonal issue versus year-over-year."
And that dip doesn't just occur in December. Neemann said that spring and early fall are the peak times for auto sales, with the other months of the year generating roughly the same amount of sales each year.
The main thing a credit union can do to take advantage of either an increase or decrease in sales activity is to have an ongoing program to remind members that whenever the need a new car, they should turn to their own credit union, he suggested. Neemann mentioned CUDL's AutoSmart website-which can be branded with the CU's logo-where members can buy new or used cars, do research, find a dealer near them and even where auto auctions are being held.
The idea, he said, is to be top-of-mind when a member is looking for a car, because while car sales do tend to be seasonal, the fact is, the need for a car can crop up any time of the year.
"When members are looking to buy cars, it's an automotive resource site," he said. "When someone needs a car, they buy a car."
Getting The Word Out
Offering this type of resource to members is great, but credit unions must work hard to make sure members know that resource exists, Neeman advised.
Lending Solutions Inc. EVP Dave Brook said auto sales in December aren't a big issue for the company's 300 credit union clients and most are busy trying to get members to open a new credit card account, signature loan or home equity loan to help them get through the holiday season. Furthermore, Brook said he'd rather not see any credit union making a huge auto loan effort during the holidays.
"They're not coming to us with any auto loan promotions. We want to see them with a well-rounded marketing plan throughout the year, not just now," Brook said.
While new auto loans may be more scarce in the winter, now can be a good time to promote refinancing.
Brook said a great way for a credit union to gain business and help its membership, is to track members' existing auto loans and offer a better rate to get another financial institutions account, which will free up some cash for the member. Freeing up cash is always a solid marketing message-but it's even stronger when members are looking for extra cash for holiday shopping.
Still, Brook echoed other experts focus on a full marketing effort and was emphatic about reaching the membership on a regular basis.
"They've got to continue to pound away year round on advertising. A member might not be back for a car loan for four or five years," he said. "A marketing plan in place will take care of people."
Yet another expert mentioning consistent marketing is GrooveCar VP and Director of Dealer Development Frank Rinaudo, who advocated refinancing other FI's auto loans and including marketing in the monthly member newsletter. Rinaudo said the efficiency and consistency of focusing on member year round will yield the best results and help to fight off competition.
Top-Of-Mind Awareness
"We want their first thought to be: credit union," Rinaudo said.
For credit unions that seek the high volume sales of indirect lending, Teres Solutions VP of Business Development Dan Chaney said a healthy, day-to-day relationship with auto dealerships is "paramount" and just as critical as constant communications with credit union members. Chaney said some CU clients hire field representatives that do nothing but interact with auto dealers as they seek new auto loans.
"They are out there every single day. Some of our customers take dealers golfing," he said. "It's incredibly valuable when you're doing indirect lending."
Chaney said as CU margins decrease and need more business, a strong relationship with a dealer will bring in more loans regardless of what time of the year.
With all the stress and activity of the holiday season, experts say a slow down in winter auto sales shouldn't be a time for distress; a well-rounded marketing plan executed consistently will sustain the auto loan portfolio no matter the season.
