Let’s face it, credit unions should always look for better ways to capture the member’s auto loan business at the point of sale. We all know it is a very competitive landscape with many financial options vying for a member’s attention. The barrage of financial choices they face at the dealership may leave the credit union out in the cold, but it doesn’t have to be this way. One of the best places to cultivate and grow your auto loan portfolio can be found by simply building out your own network of preferred dealerships. This often overlooked area can harness a great deal of new business when managed correctly.
Ultimately, in a perfect world, dealers on your network will automatically send business your way. However, this doesn’t happen without effort on the credit union’s part or without sacrificing margin on the loan. Effort can come in many forms but the one that seems to produce the best results are from credit unions that build relationships with dealers. Many credit unions have programs in place where they employ their own dealer representatives to manage the day-to-day relationships on the credit union’s behalf. Those who do not have this ability, or who have floundering programs, should seriously think about outsourcing. However, self-managing ensures you have more control over messaging and the logistics. Time spent building and managing a program will reap successful results.
Why spend time on your preferred dealer program? Well, the journey to the dealership takes many paths. The most popular road is online. Research has found 97% of members will research their car purchase online. This is a wonderful opportunity to engage the member, especially with Millennials. Keep in mind, Millennials are so tied to their smartphone throughout the entire car purchase cycle, that 2 out of 3 will continue their research using their mobile device while at the dealership. Provide this captive audience a means to shop and research their car purchase. If you don’t offer this service, you are missing out on a large amount of potential business. Having an online car shopping experience is just one key ingredient towards achieving success.
All your effort put forth in online and through traditional marketing may be lost once the member sets out to actually purchase the vehicle. The marketing efforts spent preparing a member for a visit to the showroom costs the credit union time and money. You’re expending a lot of energy behind the scenes to send a highly qualified member out to purchase a car from your “preferred” dealer network. While your credit union has been busy remaining relevant every step along the buying journey, your efforts may be for not if you’re not in sync with your dealer network.
Here’s the rub, you want to promote all dealers sending business back to your credit union, period. While credit unions feel it looks good to host the inventory of 100 or more dealers on their online buying resource, the reality is sometimes only 30 are sending business back. Credit unions should remain vigilant and concentrate on are those actively working with you. The remainder are taking valuable resources from you, and giving you nothing in return.
Why should your network of preferred dealers send you new business? It’s very simple…your car shopping platform is promoting their inventory and helping them sell more cars. Your dealer reps now have leverage when communicating with the dealers. They must clearly demonstrate the benefits and effort the credit union is taking to drive activity and business to the dealership. Walk them through and convey all that is being done to drive interest within member ranks to purchase new or pre-owned vehicles.
Need more reasons to get aggressive? Here’s a healthy statistic: Nearly 34 percent of all loan activities in a credit union is focused on auto, according to CUNA Mutual Group, the highest it has been since 2007. In other words, there is a high probability you are competing not only against the captives and the big banks but also with other local credit unions. What are you doing to distance your credit union from your competitors? Why should a dealer send you volume? How will you stand out? Promoting rate is not going to do it. Doing the same thing you have always done for the past 10 years is not going to work.
The distinct advantage you have over the dealers is in your advertising with your members. Your credit union has excellent brand recognition in the markets served. Your credit union is a trusted brand partner in the members’ eyes, they are more likely to act on recommendations by the credit union. More importantly, the dealers know this and covet this type of relationship. The value of your car shopping site is it promotes your preferred dealers inventory, a tremendous sales opportunity for your dealers. They are piggy-backing off of your brand to get more of their cars sold and it is not costing them any additional marketing dollars. This is your leverage, not rates. Dealerships are not interested in rate alone, they are interested in buyers walking through the door and your credit union is proving just that. Establish a solid preferred dealer network and leverage this opportunity by demanding more volume from these dealers. It’s all about distancing yourself from the competitors. Ask yourself, which of your competitors are providing this value proposition?
It is a big challenge to keep the momentum going once the member leaves your influence. By working on the relationship your credit union has with its serious dealership partners, you have strengthened a weak link in capturing more loan volume. Stay focused and remember credit unions are sending ready-to-buy, credit quality members, aka “real business” directly to the doorstep of the dealership. You’re driving business their way, make sure they are returning the favor.