Credit unions must embrace “Indirect2.0” to stay relevant in auto lending

What is Indirect2.0 you ask. Indirect2.0 is the use of digital solutions to guarantee auto loan success by maximizing the advantages provided by existing credit union data and member digital touch points to market vehicles, driving more auto loans and vehicle sales. Indirect2.0 reverses vehicle marketing from dealer to credit union, assuring the credit union gets the auto loan which can be booked direct or indirect with reduced or no dealer reserve. Indirect2.0 is a win/win for the credit union, members and dealers as it embraces what members want, which is easily accessible digital solutions, and there is no better time to present a vehicle marketplace other than “as members do their banking”.

To better understand the real benefits of Indirect2.0, consider the things you can’t control that have wreaked havoc on auto lending plans and results.

It’s been a wild ride in credit union auto lending the last few years. First it was COVID, then supply chain disruption and parts shortages. From there it went to inventory shortages and extreme new car pricing with 65% of new cars being sold over MSRP. Inventory shortages then lead to used car prices escalating exponentially.

As the government doled out billions of borrowed money, inflation kicked in with a vengeance (it’s not rocket science and simple supply and demand economics … more/new money chasing the same goods and services means prices rise, aka inflation). So, the Fed began ratcheting up interest rates to slow the economy down which means auto loan interest rates began rising. Higher interest rates put pressure on high new and used car prices, so car prices began to drop in order to keep monthly payments more affordable.

Throw into this mix the fact that the government was putting severe pressure and financial incentives on electric vehicle (EV) sales which drove EV sales up. Then the reality of EV ownership began to sink in with such issues of range anxiety, recognition of the EV higher cost of ownership and cold weather-related issues on batteries which drove down EV sales and EV vehicle values, leaving many EV owners “underwater” on loan valuations.

You cannot control the above issues, but you can control who your digital solutions partners are to drive the vehicle loan conversation and results.

Let’s start with a car buying fact. Your members are going online to research and buy vehicles and if you aren’t providing a vehicle marketplace embedded in your website, you have no visibility to your members’ activities, while your competitors that want that auto loan do (There’s a reason big banks like Chase and Capital One offer vehicle marketplaces on their websites). A vehicle marketplace provides the Indirect2.0 tool kit which allows you to control the online conversation and drive results.  Not only will you know every member click as they “do their banking” but you’ll be able to drive them deeper into your vehicle marketplace. You’ll also be able to provide such things as automated vehicle upgrade offers as auto loans pay down and approach maturity as well as virtual car sales promoting a loan special or specific dealers’ inventory.

Your credit union has all the data on members that can be used to drive the auto buying conversation and your vehicle marketplace embedded in your website provides the tools for success. Your members are touching your credit union digitally daily, weekly, monthly and each touch provides an opportunity to channel them into your car buying and lending funnel. These are your members, and you must keep them under your umbrella. You are in the driver’s seat with such data as:

• Existing auto loan data including expected maturity date
• Credit ranking of members
• Ages of family members—used to market vehicle loans at appropriate age/time
• When large vehicle repairs occur
• Account balances

Whether you only do direct auto loans or embrace indirect auto, your vehicle marketplace with Indirect2.0 guarantees success on either or both fronts as Indirect2.0 turns the marketing 180° where the credit union markets dealer inventory to its loyal members as they do their banking.

Your payback for embracing Indirect2.0 is higher credit quality and revenue as you’ve got members’ backs in the digital car buying world. And your added bonus is that dealer loan flipping will be a thing of the past as dealers love your credit union’s new marketing channel for their inventory as your credit union begins to embrace the end-to-end digital car buying journey.