If you’ve been involved in the indirect lending business for more than a few years, you know that historically dealers have hated credit unions. Credit unions have to take a lot, if not most, of the blame for that. They distrusted dealers and treated them as if they were enemies instead of partners. They implemented unwise policies that undermined a dealer’s ability to make money on financing or back end products. As a result, a dealer would only send a deal to a credit union if he had no place else to go with it or was forced by a credit union member to send his application to his credit union.
The tide started to turn about 10 years ago. A few credit unions caught the vision and started working with dealers instead of against them. They built successful indirect programs, growing their auto loan portfolios and adding new members. Other credit unions saw what was happening and joined in. But many dealers were still pretty skeptical, and it was an uphill battle to win them over. Then, the Great Recession hit us. What a windfall for credit unions! By early 2009 many banks and finance companies had dropped out of the auto lending market completely, but credit unions stayed in it. For many dealers it was like a religious conversion. They finally saw the light. Credit unions could be good lenders. They could be trusted. I don’t have any empirical data to back me up, but I’ve noticed a real change in dealers’ attitudes. Of course the banks and other lenders are back in it now, but many dealers would now rather work with credit unions than banks or even the captive finance companies.
So what’s the point? Credit unions should strike while the iron is hot! They should take advantage of the current situation by expanding their indirect operations and strengthening existing dealer relationships. They should be advertizing their indirect programs to their members and prospective members. They should be promoting their programs to every dealer in their market. Let them know that you want more of their business. Emphasize the following:
1. Our rates are competitive;
2. Our commissions are competitive or even generous;
3. Becoming a member is easy and can be done right at the dealership;
4. Our members are loyal, and they want their loans financed at their own credit union;
5. We want to approve loans for our members and look for ways to do it;
6. We respond and pay quickly; and
7. We’re consistent.
It’s true that overall car loan volume is far less than what we were seeing 7 to 10 years ago, but it will be back. And dealers tell us they remember who was with them during the hard times. Credit unions that cut back now on advertising and promoting their indirect programs are making a big mistake.