WEST PALM BEACH, Fla.-In the face of steep competition for auto loans, lenders and industry analysts weighed in with advice on what CUs can do to grab more of the lending business coming from the increase in new car sales.
Keith Reynolds, community president, CEFCU West, San Jose, Calif.
It's time for lot of credit unions to closely study the trends. Think back to the last time new car sales were at this level-early 2008. A lot of things have changed since then. Conventional wisdom is you want to capture younger borrowers, but we may be in an environment in which younger members have a much more difficult road to hoe than they did four years ago. Many of them have much more college debt, and there is a lot more underemployment among the younger demographic today. They will have to place a lot more money down on a mortgage. So the younger borrower does not have as much money as they did five years ago.
On flipside, a lot of older consumers had a good hunk of their wealth wiped out. It is not unreasonable to think older adults will borrow money longer in life for cars now.
Also, be quick to monitor indirect lending portals, like DealerTrack or CU Direct. The secret to the deal often is getting there first.
David Jacobson, president, GrooveCar, Hauppauge, N.Y.
At least be competitive on A-plus paper to show up on dealers' in-house systems. It does not mean you have to offer such a low rate to get all the A deals, but without a competitive rate you will not show up on the dealer systems that monitor rates. You have to at least be in the game. This way, if a deal does not go through on an A tier, the dealer may come to you for the next tier.
Make sure you are a full-service lender by offering a full range of lending products, including balloon loans and leasing. Many times today the borrower is more focused on payment, and by having these additional products you give them more ways to meet their monthly payment goals. And with leasing you don't have to be as competitive on rate as long as you pick the cars the manufacturers don't have the incentives on. This past month, GrooveCar had its best month ever for leasing.
Monitor the competitive landscape. Look at what every rate is from lenders in your market and look at them from a risk tier perspective. What are the different tier breaks? What FICO score do tiers break at? Know this and you can compete more effectively.
Dave Colby, chief economist, CUNA Mutual Group, Madison, Wis.
Credit unions need to be more aggressive. There are people out there who can buy. Better to give the member a hell of a deal but still make more than you can on investments. That is what we are here for. Don't be overly afraid about risk. Credit unions are in the people risk business, and you have a competitive advantage of knowing your members, the employment conditions locally and what will happen to collateral values within the community. You should be able to take a little more appropriate risk than a big bank.
Bill Vogeney, EVP/chief lending officer, ENT FCU, Colorado Springs, Colo.
Ultimately, how well a credit union performs with its Indirect program is based on its value proposition with the dealership. The following list is not intended to be a complete list, nor in order of importance, but if you're going to compete in indirect, these are the major factors:
* Offer competitive rates
* Deliver income to the dealer in the form of a flat fee or dealer participation.
* Provide program flexibility. Does the finance manager have the ability to extend a term at the same rate, or go up to a higher LTV for a little higher rate? It gives them some options to structure a deal.
* Don't be the "leader" in the credit standards area.
* Give excellent service-can the finance manager get an underwriter on the phone to rehash a deal? Can they reach someone at 8 p.m. on a Friday night? How quickly does the lender fund the loan once it's submitted? How easy to use is the lender's program?
* Be consistent. Can the finance manager trust the lender enough to know that a deal structured in a certain way (FICO, LTV, loan amount) will get bought today, tomorrow, next month, next year?