1. Provide members with a financial education plan that helps them understand their auto loan and the importance of making payments on time – not only for the loan being offered, but for future loans as well.

In an interview with CU Times, Hoke said he feels very reluctant to tell credit unions to make such programs mandatory, or to make obtaining the loan conditional on taking part in an educational program. However, he said research showed a link between taking part in these programs and better borrower performance on loans, especially auto loans.

In particular, an educational program can impress members by informing them that on average, the credit scores of consumers who get auto loans rise by about 52 points, compared to about 32 points for the scores of consumers who don't open auto loans, Hoke said.

2. To mitigate risk, insist subprime borrowers take on car insurance, and include a provision in your coverage that allows the credit union to add insurance to the financed car if the member does not maintain it him or herself.

"When you consider the average cost of a new vehicle is $35,000, some form of insurance is imperative for new car and even used car contracts," Hoke said.

He added that credit unions should take out gap insurance for coverage beyond the primary insurance policy in case the car is totaled. He noted this is particularly important for subprime borrowers who are able to make a monthly car payment, but don't have enough to make a shortfall payment if the car is a total loss.

Hoke also touched on the controversial use of GPS and other devices to help credit unions and other lenders keep track of financed cars in case they need to repossess them. He acknowledged there might be pitfalls to using such devices, such as privacy concerns.

While he didn't offer a firm opinion about the devices, he said he believes that if credit unions enter subprime lending with a well-thought-out strategy that includes possible impacts on member experience, use of the devices could be a good thing.

"I think it's important to make sure members understand that if you offer a loan with a device, you are doing it to make it possible for them to get the loan," Hoke said. 

The message should not be punitive, he said, but empowering in that the device can lead to loan approval and the vehicle, he added.

3. Build strong auto lending technology. 

Even if the cooperative says no to a member loan inquiry, the member will still appreciate a speedy income and employment verification, and a preliminary answer.

He also stressed credit unions should leverage the technology in whatever means they can. Robust technology allows members to research multiple vehicles, explore loan options and apply online, for example. In return, credit unions can reach tech-savvy members at the time of the purchase decision, manage dealer relationships and provide quotes for insurance products, he explained.

"Our forecasts indicate approximately 35% of loan transactions on our online lending platform will come through mobile in 2015 because members want to be able to interact with your credit union on the spot," Hoke said. "Mobile lending not only engages tech-savvy members, it also leads to new opportunities to generate additional noninterest income for your credit union."

Hoke also said credit unions sometimes fail to understand how important an auto loan can be to a lower income member or a member with a subprime credit score. Research has shown access to reliable transportation can be among the most important factors in determining whether someone will rise above poverty, he said.

"Having access to a reliable car can mean being able to get a job," Hoke said. "Or to get a better job or get into a better neighborhood with better schools. It can be huge."

Subprime auto lending marries two things credit unions value today: Making an impact and creating healthy loan spreads that can benefit the credit union as much as its members, Hoke said.

With careful thought and research, Hoke maintained credit unions can make subprime loans in a way that helps their least advantaged members and covers their costs.

4. See if your existing members are in need of such refinancing.

"The need for good, reliable transportation is so strong that if someone can't get help from their credit union, they will try someone else, and those loans often have terrible terms and carry a high cost," Hoke said.

Credit unions can build member loyalty by reaching out to members who refinanced with an outside institution through a pre-qualified, auto loan recapture program, Hoke added.