COLORADO SPRINGS, Colo.-Don't just send the coffee mugs to the F & I team, get out of the office to solidify relationships with auto dealerships being swayed by an increasing number of captive and bank offers.
Several sources urged credit unions to become more visible with dealers to battle a trend that could eventually eat into the indirect pipeline. Bill Vogeney, EVP/chief lending officer at the $3.6-billion ENT FCU, said this is particularly important as the economy improves, despite the "equity" credit unions built up during the recession by trying to help car sales and being consistent lenders. "When times are good, auto finance managers really don't care. It's all about 'how many deals can I get approved and how much can I make on this deal.' Credit unions might have the toughest time right now for auto loans. Any equity we built up with the dealers seems to have dissipated as market conditions are improving and credit standards are dropping. Loyalty doesn't mean as much when the dealer has more choices to get a deal done."
Michael Chapman, EVP/chief of consumer lending at the $6.7-billion Security Service FCU, San Antonio, the largest indirect CU lender in the nation, says SSFCU has built strong dealer relationships over the years by regularly getting out of the office and meeting with the F and I teams and dealer principles. He said it's especially important now for dealers to put faces with names, know they have someone to talk to when special considerations are needed, and that they will continue to receive great service.
"Rates are so low across the board," said Chapman. "With things sort of being equal the best thing you can do is to provide the best possible service for the dealer. Dealers always have the same issues-cash flow, finding someone quickly at the lender to answer a question, and getting an answer on loans quickly."
Frank Rinaudo, SVP of GrooveCar, Hauppauge, N.Y., pointed out that CUs are having a difficult time today competing with banks that are giving dealers much more room to mark up a rate. "Most of the credit unions we partner with do not allow the dealer to mark up the rate. But some banks have come back with a vengeance here, allowing as much as three points in markup."
Even More Obstacles
As if those obstacles are not enough, in San Jose, Calif., Keith Reynolds, community president of CEFCU West, said CEFCU has seen dealerships recently begin paying incentive fees to lenders for referring customers to them. "We have seen these incentives paid through the institution, and then also directly to loan officers."
Reynolds said CEFCU is watching to see if the CFPB will take any action to address this practice, as well as dealer markup, which he said can lead to discriminatory lending patterns.