Discovering new growth opportunities for your direct auto loan portfolio

The automotive lending market is rapidly evolving, and credit unions must find unique methods to generate auto loans if they expect to keep up. In order to address business and profitability challenges, credit unions must be efficient, innovative, and responsive to their members and the ever-changing auto financing environment.

Technology is reshaping the way consumers shop for vehicles, allowing them to compare prices, research vehicle features, and read reviews on dealers in the palm of their hands through applications like AutoTrader, Carvana, and TrueCar. Likewise, they expect the same kind of accessibility when it comes to securing financing. The evolution of such mobility and financing options combined with increasing regulatory oversight, operational risk management, and consumer expectations are dramatically changing the “rules of the road,” forcing industry participants, like credit unions, to rethink their approach to the business and adapt to industry changes.

As the complexity of doing business has grown, so has the need to streamline business processes to manage assets effectively and efficiently. The most successful auto lenders focus their operations on managing risk exposure, while still maintaining acceptable yield, leveraging size and scale to optimize processing efficiency, and, probably most importantly,  striving to meet the needs of their members.

Determining the members’ needs is part skill, part luck.  Often a member will not be in the market for a vehicle until something forces their hand.  An aging existing vehicle that brings the possibility of a large repair bill in the not-to-far future or a current breakdown that is too costly to repair can lead to a new vehicle purchase at the spur of the moment. Changes in creditworthiness or income can lead to exploring refinancing existing loans to take advantage of lower rates or longer terms to decrease payments.  Trying to read the crystal ball of auto lending can overwhelm even the savviest and experienced lender.

By taking advantage of the “technological evolution” occurring in the auto lending market, credit unions that  utilize emerging lending programs, such as outsourced loan recapture and ”no-hit” prequalifications, are quicker to reach auto loan prospects when they are shopping for their next vehicle, leading to huge opportunities for portfolio growth and greater market share. When credit unions take advantage of outsourced lending services, some of which offer mobile platforms for improved member experience, they can accommodate borrower schedules and hectic lifestyles.  “No-hit” prequalifications provide the member with peace of mind while rate shopping, allowing them to determine if an offer that works for their situation is even plausible or attractive.  Both programs are convenient for the member and deliver a better experience than the traditional vehicle shopping/financing model, while allowing the credit union to effectively achieve their loan growth goals. In addition to growth and improved member service, the additional benefits of outsourced lending include increased revenue, and market share, and can result in increased member wallet share.

Increased Revenues and Growth

Since 2014, deposits have been on the rise, surpassing $1 trillion, giving credit unions the necessary cash flow to increase lending, and in turn, revenue.  While many lenders look to indirect lending to push their portfolio higher, the stability offered by direct loans, along with the decreased capture costs, keep credit unions looking for ways to build a strong direct loan portfolio, fueled by new opportunities to lend to new and existing members.  In 2015, indirect lending grew 18.8% year-over-year, while the direct lending channel only grew 7.6%.  Your members need auto loans, and may be heading to the dealership before giving you an option to serve them.  With the right tools, the lending pendulum can starting moving toward those direct loans that we’re looking to capture to maintain valuable member relationships.

Increased Market Share

Consumers are shopping for and financing vehicles, but without reaching them at the time when they most need your services, you are missing out on a substantial piece of the auto loan market; an industry that according to a July 2017 Raddon Report, grew by 26 million units from 2011 to 2016.

Building strong partnerships with outsourced lending providers and embracing new technologies that can deliver a turnkey program can provide your existing members with access to convenient financing, introduce new members to your credit union’s auto loan program, and a provide significant boost to your credit union’s bottom line.

Click here to learn about AUTOPAY, a mobile direct-lending platform that can accelerate the growth of your auto loan portfolio by giving you access to more than 80 million new consumers!