Housing Connection?

Goldberg said, "Yes, used cars are selling, especially here in Florida. We're also seeing that trend in industry magazines like Automotive News. Last year, for example, new car sales were 17 million units; now it's under 16 million. That's a dramatic difference." Goldberg mused that the housing bubble that occurred between 2003-2005 may have contributed to what he called "the giddyup years."

"Back then, people looked at their homes and were astonished to see the rising value. 'My house is worth what!' Then, it was worth X and now, it's worth Y, and so, fewer people are buying those big SUV and luxury cars. A year ago, we sold 45% new cars and 55% used cars. Now, it's 35% new and 65% used."

"Everyone seems to want a two-year-old Honda or Toyota. That sense of well-being and confidence may be dimmed a bit by lowered home values. People are uneasy now about spending $40,000-$50,000 on a new car. They'd rather spend $20,000 on a used car."

The bright spot, said Goldberg, may be that there are many more "gently used" cars to be found, and even the value of used cars in going up. "The line is blurring," he said.

Goldberg cited another trend he'd seen from working with his CU partners. "They are tightening up on indirect lending programs and putting more emphasis on direct lending, and that plays right into what we do. I've even seen one large credit union shut down its indirect lending program (he declined to name the CU).

The deal is better when the deal is direct, he said. "The loan to value is 92% on a direct loan, so it's better for the credit union and the member. That's why I believe we've become more important to our CU partners as we've seen this conservative market settle in." Goldberg, who has been working with CUs for 23-years has seen cycles before and recalled the recession of the 1990s –although he held hope that another recession wasn't imminent. "Credit union members always come home when times get hard. That member loyalty kicks back in and the fair service is remembered, so they come back to seek advice, borrow and get a great deal."

The Salesman?

Ashley worked with Auto Advisors for several years and left to form his own company, Advantage Auto Finders (www.advantageautofinders.com) with Judy Beardslee, who was the lending manager at Florida Central Credit Union for six years. Before Ashley worked with Auto Advisors, he worked at auto dealerships. "I'm the man in all those jokes about used car salesmen," he admitted. "I know all the tricks of the trade, every bait and switch, every psychological twist and every manipulation." Now, Ashley is doing a kind of penance by writing a tell-all book about how people get so easily snookered at auto dealerships, which he hopes will be published early next year. And he formed Advantage Auto Finders to create the best way possible to buy a car.

"The car business has always been a Good Ole Boy Network kind of thing, where the salesman thought of customers pretty much like suckers. But I've seen a big change in the socio-economic climate in the last five years, particularly at the larger, national dealerships like Auto Nation," said Ashley. "They have a more corporate approach now and they've recognized that women have more to say about major purchases than the husband or significant other and they've reacted to that and become more forward thinking."

"The last research I saw said that women influenced 76% of all major purchases like a home or car, and today, most people simply don't have the time, so they want someone to help them through it and that's what we do. We hold their hands and make sure they get what they want at a fair price," said Beardslee

"Now unfortunately, a huge number of consumers feel they are equipped to do battle with dealerships when in truth, it's an amateur going up against a professional soldier. I guarantee that a dealership F&I guy will always win," said Ashley.

Beardslee recalled a CU member who got a loan through the dealer that was 130% loan-to-value and thought it was a sweet deal when in fact the extended warranty was overpriced and she saved the member hundreds by switching them to the CU-provided GAP policy. "It was always a challenge to meet the loan volume desired by the CU while also protecting the members' best interest because helping them out of bad deals takes up so much time. Converting those warranties takes time. And then the dealers weren't happy when you flipped them, of course."

"It's like d?(C)tente; remember that from the Cold War?" asked Ashley. "The dealers want to do business with credit unions, but they also want to maximize profits and the CU won't let them do that on the back-end stuff."

Ashley and Goldberg agree on many things, but chiefly that credit unions have a golden opportunity right now; facing a down market affords them a chance to be different and really push the value of CUs through car buying services. Both companies use the Web to allow people to look at available cars and ask for specific models with the specs they want. And if they don't have it readily available they will find it in short order. The pricing is also critical. They negotiate with the dealers so that there is simply no haggling allowed. And Ashley will even go to the dealer with a CU member. They will also drive the car right to the member's driveway.

Don't banks provide similar services for their customers? "Are you kidding me?" Goldberg laughed. "This kind of thing is only provided by a financial institution that cares about its clients. Credit unions have members. Banks have customers and their aim is to derive as much profit from each one as possible."

"This down market is a means to an end," Ashley said. "The pre-owned market is really up and people are not as willing to spend so lavishly as they were a few years ago. But that's when the meaning of real service can make a difference to a member, too. And face it, Americans still need cars to function; they're just being more careful in how they shop."

Auto Finders makes it palatable for both the CU and the dealer. "Dealers want to move cars, plain and simple. We always pre-sell the CU Gap insurance and warranty because it's typically a better product at substantial savings," said Ashley. "The dealer knows he has a quick and easy sale. The buyer has already picked the car; it's easy for them. The CU really does a great service for the member and we put our arms around the entire transaction."

Auto Finders now has four credit unions under contract and four more ready to sign in the next month, said Bearsdlee. Like Auto Advisors, all CU clients are in Florida, but Ashley has dreams of creating a national network not unlike the CU Service Centers model.

"As a lending officer at a credit union, this is the kind of service I would have loved to been able to offer to my members," Beardslee said.

–[email protected]