In the first quarter of 2014 the outlook for auto lending is bright, especially coming off a strong 2013 when 15.5 million new light vehicles were sold in the U.S.
The National Automobile Dealers Association predicts 16.4 million new cars and light trucks will be purchased or leased in the U.S. this year, a 5.8% increase from 2013, according to a Jan. 25, 2014, news release from NADA. In the same release, NADA Chief Economist Steve Szakaly says, "Consumers will be far better off in 2014 than last year. Employment is improving. Debt has been reduced, and home prices across all regions of the country will remain stable or will rise, yielding a positive wealth effect."
Ontario, Calif.-based CU Direct Corporation is also feeling the positive effects of the rebounding auto market. The company announced in a Jan. 21, 2014, news release that it processed a record $16 billion in funded auto loans in 2013, an increase of 25% compared to 2012.
Digging deeper, Tony Boutelle, President and CEO of CU Direct, noted in a November 2013 CO-OP Financial Services white paper on auto lending that 35% of car sales come through franchise dealers, 45% through independent dealers and 20% through private parties. "Although credit unions have strong relationships with franchise dealers and to a lesser extent independent dealers, I think there is a real opportunity to increase lending activity by connecting better with private party sellers," says Boutelle. "This is where mobile banking could pay a bigger role and it's something that we are focused on right now."
Jay Johnson, EVP of Callahan & Associates, adds that auto lending is at the highest level it has been since 2007 and should continue to grow into the foreseeable future. "With today's attractive interest rates, consumers are replacing their older cars or refinancing their auto loans," says Johnson. "Credit unions are very focused on auto lending and are working hard to ensure they are in front of their members and dealers as an attractive source of auto loans. Given the ongoing economic improvement, we believe credit unions' auto lending business will continue to be robust."
Call Centers A Key To Capitalizing
With consumers coming to expect immediate gratification anytime, anywhere, 24/7 call centers will play an essential role in helping credit unions take advantage of the burgeoning auto lending opportunities in 2014. Credit union members look to their credit unions for lending because of their competitive rates, but they also expect to be able to get a loan on their own time.
In fact, at no time in recent years have call centers been more important in providing loans to credit union members on a 24-hour basis than today. As members with smart phones and smart pads become more oriented to doing things at any hour they choose — be it to inquire about balances or originate a loan — a call center becomes that immediate source of expert advice.
Ken Brehm, vice president of consumer lending for Georgia's Own Credit Union in Atlanta, says that half of its loan activity is generated by its call center, especially during off-hours. "Capturing those off-hour loans is critical to growing our loan portfolio," says Brehm.
After Hours = Prime Shopping Time
After hours is the prime shopping time for credit union members, especially when buying a car. With a call center connection, a credit union can capture that loan opportunity. Without a call center, it may lose the loan and any associated fees, and as importantly, the opportunity to gain a new member or increase their relationship with a current one.
The possibility of losing a loan because a lender is closed for business is very real, according to CU Direct's Boutelle, who cites a series of focus groups by researcher Neil Goldman consisting of both credit union members and non-members brought together to discuss their auto loan preferences.
Focus group participants said that when they were ready to purchase a car, and if their primary lender (e.g., credit union) wasn't open, 12% of those who were purchasing new cars did not hesitate to use another lender, as did 25% of those who were purchasing a used car.
In many cases, timeliness trumps loyalty, especially when it comes to buying a vehicle. "This is a very good reason for a credit union to have a call center that operates 24/7," says Boutelle.
Credit unions with 24/7 call center capabilities will have an advantage in the increasingly robust auto lending marketplace. At the same time, a third-party, 24/7 call center can be an effective operational tool to reduce expenses, increase revenues, and support retention and attraction of members. They have the scalable capacity to service the growing number of consumers who are looking to their credit union in record volumes for loan information and lending.
Carol Cline-Parton is vice president, CO-OP Member Center, a wholly owned subsidiary of CO-OP Financial Services. She can be contacted at:
