By Ray Birch
LAS VEGAS—What do dealers want from their indirect lending partners?
Consistency in lending policies and loan decisions were common answers shared by a panel of car dealers who spoke to attendees during CU Direct’s Drive ’17 Conference here.
Dealers also acknowledged that a strong relationship will swing more business the credit union’s way—to a point. Higher incentives, they said, are hard to ignore if the difference between what the CU is paying vs. a competitor is significant.
The first thing Tim Rivers, finance director from Gunn Honda in San Antonio, told attendees was to be as consistent as possible.
“If we are going to contract someone we need to know what the decision of the credit union will be,” he said.
Need To Approve Lower Scores
Zack Stevens, finance director at Future Ford in Sacramento, Calif., said an issue with credit unions has been that they only approve higher credit tiers.
“But that is changing,” he said. “So, when I look at an A, B or C tier, I want to know what the credit union is thinking.”
In addition to clearly understanding the CU’s lending policies, Darin Johnson, finance manager at Mercedes Benz of Midlothian (Va.), said he always wants to know the credit union’s “niche.”
“We need to know what makes your credit union special for our products,” Johnson said. “There are a lot of lenders for us to choose from. So make sure your representative is knowledgeable and can clearly explain your niche to me. And then ask for the loans—because banks are in here all the time asking for loans.”
Johnson, too, would like credit unions’ after-hours decisioning tools to approve more lower-score FICOs, not just prime.
“This would help us a lot to make good loans when the credit union is closed,” Johnson said. “We don’t want that good loan, despite being a lower-score borrower, to go home and then shop another dealer. We want to put them on paper.”
Rivers said that whenever the credit union makes an exception to policy it must clearly explain to the dealer why it has made the decision.
Exception Becomes The Rule
Johnson emphasized the same point, telling attendees that when the credit union makes an exception, that the exception then “becomes the rule” if a clear explanation is not given.
“Explain why you are doing a loan like this now, but then why over the course of time you won’t do these loans,” said Johnson. “We need to understand that.”
And dealers like hearing those kinds of messages from a strong, single point of contact at the credit union, said Stevens.
“It really works having the same person to talk to,” Stevens said. “If you can’t always give me the same person to talk to, make sure the messages that come across are consistent. The reps that are knowledgeable and know what’s going on with my deals are impressive and make a difference. It makes me want to send more loans to them because they understand my business.”
The panel addressed some key points in how to keep the relationship strong.
“Believe me we want to have a partnership and not an adversarial relationship,” Rivers said, noting that when lenders’ staff say something negative about the dealer and it gets back to them that relationships then suffer. “We have many places to take our business.”
Roger Scholfield, owner of Scholfield Honda in Wichita, Kan., said that he gives his cell phone number to credit unions to hand out to prospective car buyers so they have someone to talk to when the credit union is not open.
“I think this makes the relationship between the dealer and the credit union more personal,” he said.
Johnson cautioned credit unions not to incentivize staff in ways that can hurt the relationship.
“Staff cannot be in any way disincentivized to send deals our way,” said Johnson. “If they are, we will know that and that will hurt our relationship.”
“Treat us like real people,” added Rivers. “This is a personal relationship—that is important in building the relationship.”
Rivers shared an example of how a true partnership works. He said that recently a consumer bought a car using a fraudulent identity.
“He had all the necessary documents—driver’s license, paystubs … So we booked the loan with the credit union,” Rivers said.
True Partnership
The crook got away with the car and the credit union’s insurance covered the fraud.
“But they had a $10,000 deductible, so we split it with them, since that is the right thing to do,” Rivers said. “That’s what true partners do.”
But how far will a partnership go when incentives are involved? The panel said relationships will win over price, but only so far.
“Loyalty comes into play, certainly, but if you are talking about a big difference in what we will get paid on a loan, no,” said Rivers. “We will go where the money is. I won’t send a deal to someone that gives me $100 more if I do business all the time with you. But if you are talking $400 to $500 more, then I will take that deal. I won’t lie to you.”
Stevens said the strong relationship will almost always win, as he looks long term, noting how his credit union partners stood with him through good and bad times. But even Stevens acknowledged there is a tipping point if the compensation is markedly higher on a big-dollar loan.