SUMTER, S.C.—One credit union has found that consumer demand for auto lending is not waning, as it just enjoyed one of its best auto loan promotions to date.
SAFE FCU beat is spring 2016 auto loan results by more than $10 million, and also learned there is a growing demand for indirect lending among its borrowers.
As CUToday.info has reported, sales of new cars this year in the U.S. have been slipping over previous record-setting seasons.
Ronnie Warner, VP of lending, acknowledged that SAFE has not been forecasting an uptick in results for the spring campaign that ran about 10 weeks.
“Auto industry sales are down,” said Warner. “While we anticipated strong demand for our loans, we were also prepared for that demand to be flat and even down from last spring. We did $70 million in auto loans during the last spring promo, so we thought we might to $50 to $60 million this time.”
Record Total
Instead, the $1-bilion SAFE generated a record $79.4 million in loans, 13% more than its previous the high-water set in the spring 2016 auto loan promotion. SAFE generated a total of 3,108 loans, with an average loan amount of $25,546. The“Driving You Forward” promotion also added 2,000 new members.
For the promotion period, SAFE offered interest rates as low as 2.24% for up to 60 months, below its standard 2.99% auto loan rate.
While Warner said the special low rate, preapprovals, and heavy advertising drove the campaign’s success, with a boost in indirect lending contributed as well.
“Our indirect program has always been strong, but it really did well this spring,” said Warner. “We have more than 60 dealers in our indirect program, and we service them well, talking with them regularly.”
But what tipped a greater balance of loans this year to indirect, said Warner, is more members seeking convenience.
“I think members are now less likely to go into a credit union branch for a loan,” he said. “More of them seem to like the one-stop shopping of going to the dealer, checking out the car, test driving it, then getting the loan.”
Significant Migration
Warner reported there was a “significant migration” of members who used to sign for the loan in the branch to ones inking deals at the dealership.
“The split this year was 53% indirect to 47% direct,” said Warner. “During our spring 2106 promotion the division was 58% direct to 42% indirect. Fifty-million dollars of the total loan volume this year was generated by indirect. So as you can see, there has been a noticeable shift in member behavior. I think that people are busy and just challenged for time. They like to compress the things they do into fewer steps.”
Warner acknowledged that the shift demands credit unions do more with their online car-buying resources, as well as preapprovals to keep the member from choosing another lender during the entire car shopping and car buying experience. He said that SAFE uses TrueCar’s tools.
What did surprise Warner in the latest campaign were members not choosing to go longer on term. As CUToday.info has reported, terms are extending as borrowers look for ways to keep the monthly down as car process and interest rates rise.
“This promotion was for new and used, so used cars had an impact on keeping terms down,” said Warner. “Nonetheless, the average term came in at about 47 to 49 months, and some people did go out 72 and 84 months depending on the car. But I did expect terms to increase this time over last year, and they really didn’t. I guess our members are being prudent.”
Pent-Up Demand
Warner described SAFE’s members as “loyal” to the credit union when it comes to car loans. He said many are aware that the CU has two auto loan promotions a year.
“And when they don’t see our advertising in time they typically call us and ask us if we are going to have a loan promotion,” said Warner. “In a way, we always have some pent-up demand.”