6 Steps to Moving Your Auto Loan Portfolio in the Right Direction

Is there something standing in your way when it comes to competing for auto loans? As a credit union, do you understand the advantage you have over big banks and other financial service providers during the vehicle buying process? Credit unions provide distinct benefits in many areas, so let’s explore ways to move past any barriers.

Despite greater resources in some markets, bigger financial institutions may not be the formidable competitors that they were once considered. A recent look at credit union performance compared to their competitors reported favorable results over banks. According to Experian Automotive, “Credit unions continue to increase their auto lending market share.” The report found auto originations have continued to increase since 2015, topping banks, captives and other financial service sources. While 2018 will continue to be a competitive year for growth, credit unions can capitalize on this momentum by utilizing available resources.

1. The Member Advantage

Credit unions are in the enviable position of having their members’ trust. A study conducted by Kasasa found 93% of credit union members say they trust their institution. The large financial institutions didn’t fare as well, with only one in three consumers trusting banks. Trust is a powerful tool and one of the reasons why credit unions are increasing member relationships. As members make important life decisions, be the resource they turn to first. Accomplish this through messaging, both in the branch and online.

One of those big financial decisions is an auto loan. Credit unions can promote flexibility in the underwriting process. As a service to members, credit unions provide a customized approach for getting an auto loan that works for a member’s situation. Banks cannot exercise this option.

2. Member Relations

Ask a member who has been with their credit union for any number of years, and they can likely name several staff members they have worked with. Turnover at credit unions is lower than at banks and other financial institutions. The message here is to promote long-term relationships and expert handling of the member’s business. Personalized ties and a friendly loan process doesn’t just happen anywhere. At a credit union, it’s a standard operating practice.

Promote this practice and encourage members to get pre-approved before they head out to shop for their next vehicle. As most members are conducting research online, it’s a good idea to provide easy access to this process both online and off.

3. Stand Out

We all know credit unions are different from banks and captives; this message should be consistently communicated to members and beyond. It’s well known that credit unions do better in many areas including service and rates over most of the bigger institutions. Review how you’re doing against your competitors’ offerings. Where are the weaknesses and strengths?

One area credit unions are doing very well in is with millennials. This generation is a crucial market for all financial institutions, and being a preferred banking partner with this cohort will pay off. Credit unions have been able to meet this consumer group’s demands, and increased membership is expected to continue among this demographic. Continue to place emphasis here – this is a big auto buying and leasing market growth area.

4. Preferred Partnerships

We’d all like to think business partnerships are a two-way street. But it’s important to remember most auto loans are made at the point-of-sale at the dealership. If a credit union does not offer indirect lending, it will miss out on its best opportunity to capture a loan. As the margins narrow, consider this an area of potential growth. There will never be a better time to focus on the companies your credit union provides business to. In auto lending it’s important to solidify relationships with dealers in your network. Don’t have a network? Explore one, as they are not as complex as they sound. It’s well worth the effort to shore up relations where business should be exchanged from both sides of the street.

5. Third-Party Vendors

One of the best ways to increase messaging and reach is through outside vendors. It’s expensive and time-consuming to mimic some of the programs that vendors have specialized in for years in-house. Partnering is an affordable way to enter new markets and grow loan portfolios. Being able to capitalize on the expertise of vendors is a powerful growth tool. Many third-party product offerings come with support services that can engage your credit union with members who offer new revenue streams in very little time. This is vital in auto loan growth, as 97% of shoppers go online to gather information on their next vehicle. An online auto buying resource should therefore be part of your strategy for capturing members online.

6. Auto Leasing

Credit unions that have not considered leasing are missing out on opportunity to grow their auto loan portfolios. In many regions, auto leasing accounts for upwards of 70% of the vehicles purchased. In 2018, leasing options will open up for members, as credit unions will be able to support more of the popular vehicles members want to drive. Don’t leave opportunity on the table when it comes to leasing – there are vendors that can get your credit union to participate in this market segment in very little time.

Kick the notion of not being able to compete with banks and other financial institutions to the curb. It’s a false narrative. There is more talent available and waiting to be tapped into within every credit union. Pulling it all together includes leaning on vendors and business partners to keep your auto loan portfolio heading in the direction of growth.

Frank Rinaudo is SVP for GrooveCar. He can be reached at 631-454-7500 or frank@groovecar.com.