Guest post written by Wayne Conte, Executive Vice President, Affinion Group
With over 12 million Americans still out of work, it should come as no surprise that consumers are hanging on to their cars for three to four years longer than they did in pre-recessionary times. Yet America’s long-standing love affair with cars continues — and that
presents plenty of opportunities for credit unions.
Despite the fact that consumers spent an estimated $36 billion to keep their clunkers on the road in 2011, auto purchases are making a comeback. The National Auto Dealers Association forecasts that over 13 million new cars will be bought in 2012. As many Americans start thinking about their next car, observers note that it isn’t just new car purchases that are improving — used cars and auto leases are also seeing strong increases.
Not only is the uptick in car purchases promising for your credit union, but lending evidence continues to be strong. Credit unions have had the lowest 30- and 60-day delinquencies since 2009, Experian Automotive reports, with credit unions beating out banks, captive auto and other finance companies. This connection is especially significant
considering Experian Automotive also found that the average credit scores of
car-buying customers have declined since 2009. Despite the perception that credit
worthiness may have diminished during the recession, it has had limited impact on
credit union auto loan delinquencies.
With delinquencies low and demand for auto purchases rebounding, now is a great
time to approach your members about the advantages of a credit union auto loan or lease agreement.
Maximize your auto lending opportunities
with these three steps:
1. Share the good news.
Credit unions have money to lend, so make sure your members know it. Promote, promote, promote! From your frontline staff educating your members on your current rates to your marketing team creating campaigns around the advantages of auto lending, no opportunity to spread the word should go untapped — including social media messages on Facebook and Twitter! While members (and prospective members) will get excited about your rates, don’t forget to use the opportunity to also educate
them on how your auto loan products differ from what they can get at the dealership
(including the myth of zero-percent dealer financing!).
2. Consider an indirect or point-of purchase lending relationship.
Despite your best education and marketing efforts, you still will need to capture buyers who arrive at the dealership without a lending relationship in place. According to a study by Callahan and Associates, credit unions with an indirect lending relationship tend to grow faster than credit unions without a relationship. Organizations like Credit Union Direct Lending (CUDL) in Ontario, Calif., and Credit Union Auto Loan Network (CUALN) in Linthicum
Heights, Md., can help prepare your credit union to gain more traction with auto dealers. In a recent white paper, CUDL reported that 43 percent of credit union auto loans in Q3 2011 were from the indirect channel.
3. Add value to your loans.
Think about other incentives that could encourage members to take advantage of your auto loan offers. From gas rebates to car repair discounts and auto warranties, these additional features can help make your loan/lease options even more attractive. According to the American Automobile Association, 2011’s largest auto operating expense was gas, so providing these nonfinancial features can also help connect
the dots between your member education and ongoing engagement efforts.
As the interest in driving a car until the wheels fall off starts to diminish, now is an excellent time to evaluate your credit union’s auto lending program and strategize about how you can invigorate it.