What auto dealers want credit unions to know about indirect lending

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This story is part of Credit Union Journal's ongoing series on auto lending, which will run throughout the month of May. More coverage is available here.

LAS VEGAS–Credit unions tout strong ties with auto dealers as key to their success in indirect lending, but a panel of dealers said there is more that can be done to improve relations.

That was the message from a panel of four auto dealers who spoke during the 2019 CU Direct Drive conference. In a forum moderated by Hannah Lutz, editor and reporter for Automotive News, the quartet offered insights into the good, bad and the ugly when it comes to working with credit unions.

The panelists’ interactions with credit unions varied widely.

Scott Stephens, general sales manager for Chapman Auto Group in Las Vegas, said the seven CUs he works with in the Las Vegas area have availability issues – no one to approve a loan on Saturdays, and long hold times on Mondays. On top of that, a Nevada law requires buyers to fill out a separate membership form, which adds an extra hurdle to indirect lending. James Knudson, general sales manager for Dwayne Lane Auto Family Dealerships in Burlington, Wash., said dealers in the Evergreen State face the same issue.

Knudson said when he first started in the auto business, CUs were “obsolete” in his area of Washington, drawing gasps from the crowd.

“Credit unions have evolved to become an option to the banks,” he added. “Credit unions now come in and build personal relationships.”

The panelists were asked what CUs can do to work better with dealers. Oliver Young, director of sales and marketing for the Utah-based Young Automotive Group, noted margin compression has resulted in little difference between the price at various dealers, making volume sales important.

“We want you to let people know we are reputable and we will take care of your members, and we will take care of their maintenance,” he said. “Also, if credit unions could help us find good used inventory to sell to our customers, that would help. Building relationships helps us sell more cars and fund them through credit unions.”

Nathan Post, general sales manager for the Rusty Wallace Auto Group in Tennessee, said CUs should understand that back-end products such as GAAP insurance are essential to dealer profitability. “Always leave room on that back side, because that is more important to dealers than the front end.”

Stephens said he did not appreciate the way some credit union websites list autos for sale.

“If you do business with me regularly, list my cars higher on your website than some ‘buy here-pay here’ lot,” he said. “I have spent $25,000 on 20,000 mailers for Memorial Day weekend. Those are going to random people. I would much rather spend that money to reach credit union members that you know are looking for a car.”

And while online disruptors are changing how people buy cars, auto sales is still a face-to-face business.

The in-person aspect of the transaction must be important, observed Knudson, “otherwise Amazon and Costco would have capitalized.”

Young said CUs can be a partner in the shift to digital lending, but he insisted they “have to understand” the finance piece is crucial to dealer profitability.

“The shopping process should be as slow as people want up front. Even if they shop online, they want to come feel the car – as they should. Once they decide, then the F&I process needs to be fast.”

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Auto lending Auto industry Nevada