Portfolio benefits. What portion of your loan portfolio do auto loans make up? Is this an area that would benefit from adding an indirect program?

Resources needed. Will there be enough staff to handle the additional work load resulting from things such as customer service inquiries from members as well as your dealer network? Is your department ready to handle new business that requires immediate attention?

Experience counts. Review in-house talent to assess staff experience with indirect lending. While not a prerequisite, having experience to address some of the issues your lending department will encounter will be helpful. This also might be best addressed through outsourcing.

Does this require you to create a new department? You may discover you would be best served if you established an area to handle just this market niche. How does adding a new department impact the bottom line?

Money to lend. Is there money available to fund an additional loan source? Will this be consistent throughout the life of the lending program?

Market conditions. Do your homework. Make sure you are getting the most relevant data as it relates to the competitive landscape. Third parties such as Experian and Callahan & Associates have a wealth of information to assist you. In addition, companies that manage indirect lending programs are a good resource. 

Service levels. Are your systems capable of delivering automated decisioning? If not, is your staff available to communicate with dealers after hours? How do you address weekend hours? How do you handle off hours or times when the credit union is closed? Do you have a partner you work with that would handle the overflow? 

Dealer partnerships. Are dealerships ready and willing to work with you? Do you need to hire a dealership relationship manager? Do you have the talent to build a dealer network? If not, outsourcing might be the answer. Any company a credit union chooses to represent them must demonstrate expertise in managing the interests of both the credit union and dealership.

With the right mindset, credit unions are in a position to succeed with indirect auto loans. Credit unions have the ability to offer auto loan choices members need to meet their financial goals, something banks and captives cannot always accommodate. At the point of purchase, rapid fire decision making is common to get the deal made. Credit unions at this point provide multiple choices, which makes them a viable option to help close the sale. If credit unions are not relevant at the point of sale, and the dealer does not have the option to send them that loan, they become obsolete and that member's loan is going someplace else. Helping the sale along includes the flexibility found in longer terms, competitive rates and leasing. The flexibility of financial options makes the credit union a valued partner and one that, unlike other sources that offer loan options, will actually drive members to their showrooms.

The value found in an indirect auto loan program, and the relationship that results from building one alongside partner dealers, is very rewarding. While it may require some groundwork, there are many ways to reach the final goal of either getting there with existing internal resources or utilizing outside sources that can deliver a turnkey program. Either way, a program such as this will build confidence with members who will see their credit union as a vital resource to obtaining the financial products and services they need.

Indira Khan is vice president of credit union relations for GrooveCar. She can be reached at 631-454-7500 Ext. 120 or [email protected].