LAS VEGAS — The auto lending world is moving inexorably to a model that features mobile technology and is fueled by impatience.
That is the message from Tony Boutelle, president and CEO of Ontario, Calif.-based CU Direct. The lending CUSO has invested heavily in technology, creating a number of new products over the years.
As CU Direct celebrates its 20th anniversary, Boutelle said the No. 1 issue facing CUs in auto lending today is after hours availability.
"In today's world, no one wants to wait for anything," he said. "I tell credit unions 'if you are not open, somebody else is.'"
If the CU is doing enough lending volume, it typically can handle the staffing and technology needs to be ready to make late decisions on the spot in house. If not, Boutelle suggested they outsource.
Of course, in some cases the "old-fashioned" way still works. Boutelle noted he has talked to a number of credit unions that have long-term relationships with dealers who are willing to wait until Monday for a final funding decision.
"But in those cases the dealers already know the credit union and its underwriting standards, and are pretty sure the loan will fund," he said. "That is an example of how it can go with relationships that have been built up over time, but waiting does not work for every dealer."
Lending Success
After some pretty dry years during the recession and the painfully slow recovery, Boutelle said a heartening trend is auto lending for credit unions was up dramatically in 2013 from 2012.
"And through April, 2014 is up over 2013," he said. "CUDL credit unions did almost $2 billion in loans in April. We are seeing a high level of engagement from credit unions. They are coming out of the recession and want to put earning assets on their balance sheets as the mortgage market has pretty much dried up."
While indirect lending has allowed CUs to branch out geographically, now they're using it to branch out to different types of big-ticket consumer loans: furniture, HVAC, spas, home improvement, solar energy — even loans for medical procedures.
OnSpot Financing, an online provider portal CU Direct unveiled earlier this year, allows credit unions to offer point of sale financing at a number of retail or medical establishments.
"We have the technology to expand the lending network beyond auto — we just need to get credit unions to embrace other lending ecosystems," he said. "They are smaller loans, but there are a lot of providers out there in a lot of different industries."
According to Boutelle, the issue that slows credit unions down with expanding into these new areas is lack of knowledge, especially relative to the familiarity with auto lending. He said there is "a lot" of work to be done for the new network to be successful.
"Credit unions will have to pick the markets they want to get into because the choices are so overwhelming," he said. "It probably would work best to specialize in a couple of areas because it would be too difficult to be good at all of them. Eat the apple one bite at a time."
Making a Difference
Some credit unions get frustrated with with the auto lending business because there is such a supply of available, cheap money, Boutelle said. It can be difficult to make a difference as a credit union, because "they can only put their rates so low."
Two market-building strategies he suggests is offering members pre-approvals and shopping services. To the latter, he said CU Direct has its AutoSMART service, which uploads thousands of vehicles daily, and AutoPREMIER, a concierge-level service.
Research shows 45% of car shoppers use their phones at the dealership, "so giving credit unions and their members a tool to use is important," he said. "The AutoSMART app shows available cars, calculates estimated payments, finds a dealer, and even helps people apply for a loan."
The future is bright, Boutelle predicted. He said credit union engagement with auto lending is at an all-time high with 23% of new origninations going to credit unions, after being as low as 15% of the auto market a few years ago.
"The biggest key is to use analytics to make more loans," he said. "Maybe not at the point of sale, but a few weeks after the purchase the credit union should offer to refinance the person's other loans."
