LAKE SUCCESS, N.Y. — DealerTrack, the auto lending financing source for 22,000 car dealerships wants more credit unions to know that it's the "go-to" provider to those that want to increase their indirect loan portfolio. Mark Brown, vice president of lenders solutions at DealerTrack told Credit Union Times they have the "broadest dealer network, and that's the most important aspect of providing service to members."
Brown said that DealerTrack Holdings, Inc., https://www.dealertrack.com (Nasdaq: TRAK), is the leading provider of on-demand software and data solutions for the U.S. automotive retail industry. Dealers receive consumer leads, submit credit applications and receive responses, compare financing and leasing options, sell insurance and other aftermarket products, document compliance, and execute financing contracts electronically. They say they do business with 90% of all franchised dealers and can connect with over 350 financing sources, half of which are credit unions.
But the number is more than 175 CUs, said Brown, because Credit Union Acceptance Company, http://www.cuacdirect.com/, services at least 58 CUs and San Antonio Credit Union's CUSO, CARS, offers their auto dealer arrangement with some 20 others. The network is growing, Brown said, as more credit unions see the need to both reach their members at the dealer's F&I office and create new members through indirect auto loans.
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Fewer CU members bother to obtain a pre-approved car loan before shopping nowadays, but if they do, dealers will do the loan the member wants. If a member asks the dealer to do the loan through the CU, the dealer will also comply, he said, and if the CU isn't on the DealerTrack network, it will be processed via Facsimile.
"But the speed of the application, and the detail contained in the electronic contract process" has now become the lifeblood of the buying process, Brown claimed. "Lenders understand the power of that speed, and that's why we're signing up more lenders every day." From January until May of this year, another 100 credit unions have joined DealerTrack, he said.
The bottom line of it all is that CUs have come to embrace indirect lending (particularly indirect auto lending) and it is evidenced by Automotive News' finding that the CU share of it jumped to 10% in 2006 from just 3% in 2004, said Brown. Expect it to go even higher, as the Power Group found that between 70%-80% of all cars sold are financed indirectly.
"Auto lending is a big important business and the indirect portal is a huge segment of that; credit unions see that it makes sense to be involved and DealerTrack has the greatest breadth of dealership relations in the industry," Brown noted. While the captive lenders are competition, it's the non-captives that write the most business, at least two-thirds of it. Which means there is still ample room for credit unions to retain a big share of market and regain the peak share of 19/3% they had in 2005. In 2006 the CU share was 18% and the first quarter of 2007 comes in at 16.8%.
Speed and simplicity are the means to that end, it seems, and electronic contracting is integral to getting that accelerated approval and DealerTrack now has 23 lenders on its e-contracting platform, five of which are CUs. The e-contract allows a dealer to take the app, do the contract and use an electronic signature. An electronic vault can hold the data and accessed if the lender wants to securitize the loans.
Brown said the benefit of the e-contract is that it cuts the processing time in half, so that an employee can do twice as many contracts over the paper system in the same time. And the "rework" of an e-contract is significantly less than it is for paper.
The credit application is free to the dealer, and DealerTrack makes its money from transaction fees, after a small software system set up charge. There is a high volume discount for lenders, but Brown would not disclose the amount of the volume level required to get a discount. Business is good, however, as DealerTrack reported revenue for the quarter of $51.7 million, a 36% increase from $37.9 million for the first quarter of 2006. GAAP net income for the quarter was $4.8 million, a 40% increase from $3.4 million for the first quarter of 2006.
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