By Mike Moore
The automotive lending market is rapidly evolving, and credit unions must find unique methods to generate auto loans and keep up with evolving technology. To address business and profitability challenges, credit unions must be efficient, innovative, and responsive to auto dealers and members.
Borrowers are empowered with innovative mobility and transparent financing alternatives through technology that’s redefining the automotive sales and finance landscapes. Technology is reshaping the way consumers shop for vehicles, allowing them to compare prices, research vehicle features, and read dealer reviews in the palm of their hands through applications like AutoTrader.
Likewise, they expect the same accessibility in securing financing. The evolution of mobility and financing options combined with increasing regulatory oversight, operational risk management, and consumer expectations is dramatically changing the "rules of the road," forcing industry participants, like credit unions, to rethink their approach and adapt to industry changes.
In addition to adopting new technology, a robust indirect lending program is key to maintaining a steady flow of new member-generated auto loans. And you don’t have to handle everything in-house. Many viable programs can help grow auto loans and increase revenue.
Because of this “technology evolution” in the auto lending market, credit unions that don’t take advantage of alternative lending methods, such as outsourced and indirect auto lending, miss out on opportunities for portfolio growth and greater market share.
Increased Revenues
Since 2014, deposits have been on the rise, surpassing $1 trillion, giving credit unions cash to increase lending, and in turn, revenue. The fastest and most effective way to put those deposits to work is through an indirect auto lending channel. With a solid indirect lending program, a credit union could lend out an average of $1-$5mm per month at an average interest rate of 5%, generating growth for the financial institution through those deposits.
Increased Growth
An indirect auto lending program is practically essential for most credit unions to stay competitive. In 2015, indirect lending grew 18.8% year-over-year, while its direct lending counterpart only grew 7.6%. It’s one of the most efficient ways a credit union can add new auto loans to its portfolio.
Increased Market Share
Increased market share is another great reward credit unions reap from outsourced and indirect lending programs. After all, if you’re not active where consumers are shopping for and financing vehicles, you will forego a substantial piece of the auto loan market share, an industry that according to a July 2017 Raddon Report, grew by 26 million units from 2011 to 2016.
Further, capturing a larger share of the auto loan market gives your credit union the opportunity to cross-sell other products, such as mortgage loans, credit cards, small business and commercial loans, and point of sale and insurance products, making the possibilities for growth and member retention nearly endless.
Visit swb.us/lending to learn about AUTOPAY, a mobile direct-lending platform that can accelerate the growth of your auto loan portfolio.
Mike Moore is SVP-sales with SWBC, San Antonio. Mr. Moore joined SWBC in 2013 and has more than 20 years of experience in consumer lending and financial services.