Car iowa loan refinance

Put Auto Lending In Overdrive

Members want speed, simplicity, and convenience.

As competition for auto loans increases, consumers will look beyond low rates and demand faster service and more convenience from lenders. Credit unions can respond by making the loans easier to get and by using technology to hasten the process.

"Make it fast, simple, and convenient," says Mike Harvey, executive vice president of John Deere Community Credit Union, Waterloo, Iowa. Harvey, along with Doug Sharkey, assistant vice president of lending administration at FORUM Credit Union, Fishers, Ind., Florence Brown, FORUM's vice president of operations, and Sharon Gaugler, vice president of lending at Austin (Texas) Area Teachers Federal Credit Union and a CUNA Lending Council Executive Committee member, share their auto lending strategies.

Q What successful auto lending strategies have you employed?

Gaugler: Our recapture program has been successful. We use a third party that pulls a list from the credit bureau of members and eligible nonmembers who have had car loans for six to 18 months. We offer a lower rate to those members. We bring in about $500,000 a month in recaptures.

We also reviewed our credit union's indirect lending program and what our competitors were paying dealers. We increased the reserves we paid dealers, and that has helped us bring in more loans on the indirect side.

Finally, we developed a modification program where we allow members who have a loan with us to pay $50 to lower their interest rate and payment. This way they don't have to refinance or take out another loan. We did this to combat recaptures from other institutions.

Harvey: We have a strong indirect lending program. Most of our auto lending growth comes from that. We work with about 130 auto dealerships in Iowa.

At the end of April, our total loans outstanding were about $711 million. The indirect lending program accounts for about $240 million of that.

We try to make it easy for members to qualify for new-car loans. We changed our parameters for what we consider a new car. For example, we'll finance any car that has fewer than 20,000 miles and is the current or previous model year at the new-car rate.

We're aggressive when it comes to competitor pay-offs. When a member comes in for a vacation loan or a Visa card and we see that this member has an auto loan at a for-profit institution, we try to move it to the credit union. It's a way to gain market share, and members love it because it saves them money.

Sharkey: We have a free auto-buying service called Auto Advantage. Members let us know what kind of vehicle they're looking for and we'll work with local dealerships to get the best deal.

We do all the work and deliver the car to the member. The program generates revenue, and our members love the convenience. They don't have to do any of the work.

Q What other elements make these efforts successful?

Brown: Good training and incentive programs are essential. We make sure employees are ready, willing, and able to capture every opportunity presented to them. We have a Cross-Selling Superstar program where we reward and celebrate employees' successes. It's important to recognize people for their contributions.

TAPS, FORUM's automated lending platform, helps employees take applications easily and respond to members quickly. That's been paramount to our success.

Harvey: Our members want convenience. They can go to any dealership within our geographical field of membership and ask for financing through the credit union. They can sign the loan papers without having to make a trip to the credit union. They can buy a car on a Saturday afternoon or whenever.

Q What are some challenges you have faced?

Gaugler: Our biggest hurdle is the recapture of our loans by other financial institutions. They're making it easier for people to do business with them so it's easy to move people's loans.

We educate and train our staff that if someone calls for a payoff, they need to find out why the member is paying off and to figure out a solution so the loan doesn't get paid off. We want our staff to go beyond quoting payoffs and interest rates.

We've seen a slowdown in loan payoffs, and we've seen more excitement from employees because they're trained on how to retain loans.

They now can respond to members who call looking for a better rate.

Sharkey: Keeping up with technology. We're implementing Dealer Track, a system allowing dealers to submit loan applications and shop them to lenders at the same time. This type of technology significantly increases lenders' response times.

Q How have your auto lending strategies changed over the years?

Brown: We're proactive in looking for and offering members the products they want and need. It all comes down to convenience because no one has time anymore. And we try to do things as easily, quickly, and as cost efficiently as we can.

Gaugler: We're more aggressive with our application follow-up. There's so much competition: Members can go to a dealership and be offered rates from five different credit unions. Years ago, only two or three credit unions in the area may have been indirect lenders.

Harvey: Our indirect program is all about convenience. Our call center is open seven days a week. Our supermarket branches are open every weeknight until 8 p.m. and on weekends. We're available to members through the Web site or in person seven days a week. Members call on Saturdays or Sundays to talk to a loan officer. Even if they don't make a deal, that's when members have time to check on affordability and preapproval.

Q How will your auto lending strategies change in the future?

Sharkey: Our society is moving more toward paperless transactions. We don't have electronic titles yet, but other states do and we're evolving to that point.

Gaugler: If rates go up, that will slow down the recapture program because we'll no longer have the leverage of the lower rates. Lenders will have to market something other than loan rates.

We'll have to come up with something that consumers want. When rates go up, people will keep their cars. You have to stay close to members so when their cars wear out, they'll talk to you first. Educating and staying in front of members will be key.

Q Advice to other CU auto lenders?

Harvey: Think of the process from the member's perspective, and make things easy. Members compliment us because there isn't a lot of fine print on our applications and there aren't any hidden things, such as teaser rates, that change a few months into the deal.

Brown: Set goals and establish expectations. We challenge our teams to reach for the stars as much as possible. Everyone needs that focus to make sure they're on the right track.

Gaugler: Don't try to compete on price. Provide the best service and make the process as fast and painless as possible. Even though some credit unions don't like to work with auto dealers, having rapport with the dealers will be essential as rates start going up.