RANCHO CUCAMONGA, Calif. — Wescom and other credit unions may have pulled in the reins on indirect auto lending as a membership strategy, but the head of the industry's largest indirect provider said it's not affecting his business much.
"Ironically, our business is actually quite good," said CUDL President/CEO Tony Boutelle. "We've experienced record revenue the last few months, not because things are all that good out there, but rather because we have a few things happening."
Boutelle said CUDL currently has about 700 credit union clients, which is an all-time high. New clients are picking up the slack left by scaled-back credit unions like Wescom, he said. In fact, CUDL's July numbers are 10% over budget, funding $1.1 billion last month alone.
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Credit unions aren't the only ones knocking on CUDL's door. Boutelle said dealers are reaching out to credit union financing because a lot of their traditional funding sources, like captives and bank programs, have dried up. And, home equity funding is no longer readily available to consumers, at one time accounting for as much as 25% of all auto loan financing, he said.
While some credit unions have scaled back their indirect activity, few have ceased indirect lending altogether, Boutelle said, because there are so many opportunities at dealer point-of-sale.
"I think several credit unions have pulled back on using indirect lending to attract new members, but traditional credit union members tend to perform much better than what the FICO says they will," Boutelle said. "Retail loans will perform closer to what the FICO says, which means higher delinquencies, so credit unions tend to look at indirect lending as more of a risk."
However, he said, with an upgrade in core competencies, even new indirect lending members can be effectively managed.
"If indirect lending was really a bad business, banks wouldn't be doing it," Boutelle said. "They have the same issues, except credit unions start off with a lower cost of funds. Other than that, there's no real advantage, you're going after the general public, just like a bank."
The CUSO isn't ignoring the actions of Wescom and others, however. Boutelle said CUDL is developing more resources to help existing credit union members get better deals on vehicles and hopes credit unions will use the services to their advantage. For example, members can negotiate a sale price with the dealer through CUDL before setting foot on the dealership floor. Financing approval is also sent to the dealer in advance.
"The idea is, a five-hour trip to the dealership can be reduced to only one hour, and that's what we're pushing for, improving that experience," he said.
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