MADISON, Wis.—While credit unions are enjoying record auto loan growth, there are warning signs in the data that suggest tougher times could be ahead—if CUs don’t take the proper steps.
Susan Hochsprung, VP of sales at CUNA Mutual Group, told attendees at the company’s Discovery Conference that the record growth CUs are enjoying is masking a decline in the percentage of PFI members taking car loans from credit unions.
As credit union auto loans in dollars and numbers are growing, and they are claiming a record share of the market, growing share at a pace much faster than the banks, much of that is due to the indirect channel, she noted.
“The percentage of PFI members with an auto loan is actually shrinking,” said Hochsprung, noting that the percentage of PFI members with an auto loan at credit unions dropped by three percentage points in the last two years. “Credit unions are making more loans to non-PFI members.”
‘Complex Story’
Hochsprung called it a complex story hidden in the data and masked by CUs’ 14.8% annual auto loan growth rate—almost double the growth rate of banks. But, again, she pointed out most of that growth is via indirect, and when comparing bank and CU direct loan numbers there is not a big gap.
She added that credit union direct loan growth is plateauing, and is projected to decline in the coming years. “Our research projects that by 2021, 61% of all credit union auto lending will come from the indirect channel,” she said.
Hochsprung said the real concern is that credit unions are losing share of wallet with their most important, loyal members. She said this is also concerning as new car sales slow, and a recession is forecast by economists within the next two years.
Hochsprung emphasized that credit unions should pay attention to this issue, as PFI members begin to choose others for their financial services. This is “silent churn” many credit unions do not see, she said.
“Silent churn is when other financial institutions, and fintechs, begin to steal your PFI members’ business. Maybe they still have a checking account with you, but what about the auto loan or credit card?” Hochsprung said.
The major reason CUs are losing PFI auto loans is that banks and other lenders are out-marketing them, said Hochsprung.
“Our research found that if credit union members receive four auto loan offers, three of them are from someone other than the credit union,” she said. “So credit unions are being out-marketed by four to one.”
What CUs need to do is step up their marketing to members, but also employ strong analytics, Hochsprung said. She emphasized that credit unions should dig into their data to identify PFIs and monitor their activity not only to look for signs they may be accepting another auto loan offer, but to choose the right time to approach them with a vehicle loan.
“The offers have to be relevant, at the time members need them,” Hochsprung said, emphasizing the importance of predictive analytics.