Is a Peak Finally in Sight for Auto Lending?

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Indirect lending is behind credit unions’ meteoric rise in auto loans, and can help keep the pipelines open during a downturn.

Credit unions are marking out their territory in auto lending, and instead of dealing with a decline, some say they can hardly deal with the volume. However, that does not mean a downturn isn’t on the horizon.

According to CU Direct Market Research Analyst Jose Torres, predictions from a number of industry reports say it’s likely that new car sales will plateau in early 2017 and then begin to decline. Now credit unions are turning their focus to dealing with a decline in new auto sales, and that may mean relying on indirect loans — the very thing that fueled the industry’s competitive rise in auto loans — to buoy their portfolios.

Whether or not a downturn comes, it is on credit unions to take advantage of every opportunity they get.

Streamline & Automate

By squeezing out every drop of efficiency, credit unions can save time and compete with major lenders. Modern technology has allowed smaller financial institutions to enter the indirect lending market, but new software will empower them to excel.

Manual review of loans may not be a thing of the past, but software can lend a hand in data analysis, pull from complex databases, track fees, enable loan modifications at the press of a button, or just crunch raw numbers.

Continue Building Relationships With Dealers

Many credit unions attribute a good relationship with dealers for much of their success, and some have accelerated their hiring of dealer reps for this purpose. Strong dealer and credit union relationships are the cornerstone of Preferred Dealer Network programs.

Adversarial relationships hinder new loan acquisitions and are generally bad for business, while a strong, mutual commitment means greater ease of access for members, growth for their loan portfolios, and enticing new members as well.

Pay Attention to the Market

Nothing is set in stone, but virtually all auto manufacturers, including the Detroit Three, have reported a dramatic slowdown in car sales. This has been offset by strong truck, SUV and crossover sales however.

Keep your eyes on the market, but also on your competitors and what they are doing. Something as simple as a quarterly check of their rates and reserves can help greatly.

Educate Your Organization

How educated are your employees on your own products and services? They don’t need a comprehensive understanding, but they should at least know the basics. Many credit union employees know very little about their organization outside of the parts they work with, which can hinder the credit union from working effectively.

To be ahead of the curve, your organization must be in lockstep. Educating employees early on can turn them into effective educators in their own right, allowing them a greater ability to help members select products.

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