Focus on CU and Dealer Relationships
Credit Union Case Study
Discover how one credit union has been able to build successful dealer relationships that have led to increased loan volume and grown membership.
Credit Union of America needed to capture the auto loans it was losing at dealerships, as well as grow its membership. The Wichita, Kansas-based credit union recognized that in order to correct its trajectory and unlock its full potential, it would need to adopt or incorporate a new auto lending system, as well as find a better way of working with local dealers to capture more loan opportunities. It also needed a strategy to establish and maintain the same level of convenience that major lenders offered their borrowers.
The Challenge: Increase loan volume and grow membership
Credit Union of America didn’t have a true indirect lending program in place and it hadn’t had success in developing solid relationships with local dealers, which hindered new loans, as well as the acquisition of new members.
As a result, the credit union was losing members (and loans) at the point-of-purchase and its auto loan portfolio was shrinking. Moreover, what auto loans the credit union did obtain were mainly refinanced loans that had originally been made at dealerships through other financers. The credit union’s existing members were dissatisfied with the process of getting auto loans from the credit union. Additionally, the credit union wanted to improve its membership growth rate through the indirect channel.
The Solution: Implement CU Direct’s indirect lending program, while reaching out to local dealerships
“We were losing our members at the dealership,” recalls Gary Hull, the lending manager of Credit Union of America. “With no way to refer our members back to us for financing, our new car sales were really declining.”
After looking into a number of solutions that were available to financial institutions, Credit Union of America determined that they needed to implement an indirect lending solution that addressed specific concerns, including providing greater convenience and a simplified loan process to their members, growing both its membership and auto loan portfolio, and building successful relationships with local dealers. The credit union decided that partnering with CU Direct was the best option to address its needs.
“We also wanted to change the nature of our relationship with the dealer,” adds Gary. “We wanted to make sure that it involved more than just ‘lip service’ – you know, the courtesy calls where you pick up everyone’s card just to show you were there.”
After implementing the indirect program, the credit union’s staff took on a new initiative — building personal relationships with the staff at Scholfield Honda by making a point of visiting the dealership to speak with everyone, not just the front office people, and not just about business.
“We took the time and effort to develop personal relationships with everyone at Scholfield Honda, and it changed everything,” notes Gary.
The Results: A Big Turnaround
Credit Union of America was able to turn its adversarial relationship with dealerships, including Scholfield Honda, into one of partnerships, while its membership growth has mirrored its growth in lending opportunities. Since implementing CU Direct’s indirect lending program and its new strategy, the credit union has experienced exceptional auto loan growth and achieved 32% penetration for auto loans among its members.
In the eight years since it began using the program, and developing relationships with local dealerships, like Scholfield Honda, Credit Union of America has experienced dramatic growth in auto lending activity. The credit union has experienced a 42% growth in indirect loans since 2005, processing 6,552 auto loans totaling over $101.5 million in 2012.
Today, Scholfield Honda steers most of its credit union buyers to Credit Union of America for financing. As testament to the success of their relationship, 91% of loans that Scholfield sent through the CU Direct’s CUDL lending platform in 2011 went to Credit Union of America
Credit Union of America now does business with 73 local dealers and was able to grow its membership from approximately 25,000 members to more than 49,000 members in 2012.
“There’s a huge distinction between making a courtesy call and coming in because you’re friends with everybody at the store and you just want to say hi,” according to Ron Godwin, Scholfield Honda’s Finance Manager. “There’s a reason why Gary has all of our car loans, a reason why he has my mortgage, a reason why probably 75% of our employees at Scholfield Honda have their personal loans with Credit Union of America. It’s because Credit Union of America here in Wichita cares about Scholfield Honda’s personal success.”