Last month, I shared my thoughts on the difference between our COVID-19 recession and The Great Recession from the perspective of the potential for auto loan growth in 2021. This month, I’d like to provide a checklist of sorts for your auto lending strategy.
If you’re a credit union making indirect auto loans, you have to ask yourself almost every day this one question: “What is our value proposition?” In reality, if your value to the dealership is that you “buy paper,” it’s never been good enough in the past and it sure isn’t good enough today. The best credit unions see dealers not only as a source of loans, but as a business partner. You need to understand and be concerned about the dealer’s business!
How flexible is your program; do you have reasonable guidelines so that a dealer has some room to put together a deal? I often see a lender try to unduly limit the amount of “back-end” products like mechanical breakdown and other protection packages. While a dealer can certainly be overly focused on extracting every penny of profit from each loan via product sales, I believe it’s better to manage from a macro level and deal with the consistent offenders than trying to limit to a certain dollar of products per loan.
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