Convenience and Rates Rule Auto Loan Market - Credit Unions Deliver Both
By Gina Ragusa Credit Unions Online
Before you go for dealer or bank financing on that next vehicle check out your credit union. Credit unions are notorious for leading the industry in auto loan financing because of lower than market rates and superior service.
CUDL, an Ontario, California based provider of indirect and point-of-purchase lending services for the credit union industry, authored a white paper saying that auto lending continues to be “a significant portion of the credit union loan portfolio.”
CUDL reports that indirect auto loans account for approximately 43% of credit union auto loans during third quarter 2011 and credit union market auto loan share has remained above 17% since May 2011.
David Brand, Director of Loan Origination for Hudson Valley Federal Credit Union ($3.4 billion, Poughkeepsie, NY) backs up this assertion by saying that nearly 80% of the auto loans at his credit union come through the indirect channel. “This gives the member the convenience of getting their HVFCU loan without having to go into the branch,” Brand explains.
“We market to members that they can feel free to finalize their vehicle loan online, at the branch or at the dealer to make them feel comfortable with this delivery channel. We also have small signage up at many dealers informing the public that HVFCU financing is available at that dealer, so we can have the member view the dealer as a trusted extension of our branch network. Overall, we have flexible terms, such as 72 months financing, and no model year or mileage restrictions, which gives us some real niches in our market.”
Stephen Grech, EVP/Chief Member Service Officer for Credit Union One ($750 million, Ferndale, MI) says that convenience and stellar service delivery for both dealer and member is what keeps his program going strong.
“We have a long standing relationship with our existing dealer base,” Grech says. “Not only do we continue to visit and reach out to our existing base, we are growing our number of dealers.” He says that the credit union recently reached the 200 dealer mark.
“Although Michigan has been hit hard by the recession, our auto loans have remained relevant,” Grech adds.
Numerica Credit Union ($1.2 billion, Spokane, WA) is another maverick in the field of indirect lending. Gene Fitzpatrick, VP of Lending/Risk Management says that the credit union offers the same low rates for new or late-model used vehicles, regardless of whether the member is buying a car, truck, van or SUV.
“We also offer 100% financing for qualified members with terms from three to seven years.” Fitzpatrick reports that Numerica has 100 auto dealers throughout all its markets. “This service allows members to finance while at the dealership, and allows new members to enjoy the low rates that Numerica has to offer.”
Quick Funding is Key for Indirect Lending Success
In addition to strong service, offering swift funding is a priority for dealers. “Our 24 hour funding time sets us apart from the dealer perspective,” says Robert Mercier, Senior Regional Sales Manager at Credit Union One. “You have to keep the member perspective front and center and in order to do so, you must offer something to attract the dealer first. You aren’t in the game unless you can turn those loans around quickly.”
Fitzpatrick says that Numerica also believes strong service backed by prompt funding is the best way to get an indirect program to shine.
“Credit unions are focused on serving the financial needs of our members and on helping them realize their dreams before focusing on making a profit,” Fitzpatrick says “Therefore, our loan program is designed to meet our members’ expectations of good value and quick turnaround. We also help our members make good decisions on their purchases and ensure that they have a loan that fits their lifestyle. We want to ensure that our members are healthy financially, so we provide the tools and service to help make that happen.”
Brand says that it all comes down to convenience--on both ends. “Members love convenience, so whenever we market our auto loans, one of the most important things we mention is that you can finance right at your dealer,” he says.
“HVFCU has such an extensive list of participating dealers throughout our community field of membership that members can virtually find any make or model they’re searching for form a participating dealer. We always maintain a current list of participating IDL dealers online for easy reference, and we even have a mobile app they can use to research pricing and models while they’re on the dealers’ lots. And naturally we tell members they can also finance through us online or in our branches, which is often how our private purchases are handled.”
Members Save Money Across the Board with Credit Union Auto Loans
“Members will save money by financing through Numerica as opposed to using a bank,” Fitzpatrick says. “Our finance charges are generally less, making their monthly payment and total vehicle cost lower. For example, the average finance charges at Numerica for a $25,000 auto loan are $2,291. The same priced vehicle when financed through a bank would have average finance charges of $2,995.”
Darlene Stuart, VP/Lending Operations at Credit Union One recounts a few instances where members saved both time and money by financing through the credit union. “We had a member who was interested in refinancing an auto loan for $18,000. He had an interest rate of 18.99% with another lender, applied here and was approved at 6.24%. He saved $9,800 just by refinancing with the credit union plus his term was reduced as well.”
Stuart recalls another instance where the credit union worked closely with a member who experienced recessionary hardships and was in desperate need of a vehicle. “We worked closely with this gentleman and conducted a thorough interview,” she says. “As a result our underwriter was able to approve him for an auto loan that was priced accordingly.”
“Credit unions have a great opportunity to assert themselves to not be the cookie cutter lender as long as they make sense and apply pragmatic standards,” Stuart adds. “Let the applicant tell their story, you can’t judge. It’s a great time to be a credit union right now.”