Smaller Credit Unions Level the Auto Lending Playing Field

Ohio Healthcare FCU has been capitalizing on current market conditions to grow their auto loan portfolio despite being a smaller credit union without an indirect loan portfolio.

While difficulties in the external automotive market are certainly making it more difficult for many lenders, there are still opportunities available for credit unions to come to the aid of their members. In fact, there are some credit unions that have actually found increased success thanks to the struggling auto market, as it has opened certain doors that may not have been available to the credit union previously. One of those credit unions that has found success is Ohio Healthcare FCU ($37M in Dublin, OH).

Bill Butler, CEO of Ohio Healthcare, said that in their local market the dealers were struggling, creating the perfect opportunity for the credit union to focus on introducing themselves to dealers that they were not currently doing business with. With other lenders leaving the market, and vehicle sales continuing to decline, dealers were more willing to work with institutions they may have ignored in the past. As a $37M credit union, it had been much more difficult for Ohio Healthcare to get in the door with many of these larger auto dealers. Previously, simply bringing people to a dealer who might buy cars wasn’t enough, Butler noted, But now I believe that it is, creating an environment that is more open and inviting to smaller credit unions.

Capitalizing on Market Advantages

As the market opened up for Ohio Healthcare, they found themselves with access to a wider range of dealers more willing to work with the credit union to finance these purchases. This was great news for Ohio Healthcare, as they had recently been in the process of trying to re-focus their efforts on dealer relationships. Just as they were planning to increase the number of dealership visits credit union representatives made, the market turned downward and the doors flew open.

One aspect that sets Ohio Healthcare apart is the fact that they are exclusively a direct lender. As Butler explains, About two years ago, the credit union moved from a single-sponsor to a TIP charter that encompassed all healthcare workers in the state of Ohio. As the credit union continued to expand, we felt that indirect lending was still something that we could do without. So far it hasn’t been necessary in order to maintain our loan to share ratio.

Despite the fact that the credit union engages in no indirect lending, this current market has provided them with the opportunity to begin developing these relationships with local dealers, an area where the credit union had not previously been puttingmuch of an emphasis. These relationships are helping the credit union drive balances and loan quality, and they also would become even more important as the credit union worked to take advantage of the Invest in America program.

Taking Advantage of Invest in America

Since the credit union is based in Ohio, they are in one of the test markets for the Invest in America program, which offers supplier vehicle pricing to credit union members. As the program began to roll out, Ohio Healthcare began working with local dealersto get the word out about this new benefit of credit union membership. With increased awareness from members and local dealerships, Ohio Healthcare has seen a steady increase in their auto loan balances over the last few months. Previously, theirauto loan portfolio had been in what Bill Butler called the slow drift downward. However, since capitalizing on the Invest in America program, the credit union has generated an additional $4M in auto loans, an impressive figure for acredit union with less than $40M in assets.

If they don’t know you exist, they can’t take you seriously

Ohio Healthcare has become an excellent example of how a smaller credit union is using this tumultuous market to their benefit, and how they are finding success with strategies and initiatives similar to many larger credit unions with dedicated indirectlending programs. In the past, many credit unions that did not engage in indirect lending have viewed dealer relationship management as something that they did not need to worry about. As dealers continue to struggle, and credit unions look for waysto grow their auto loan balances, we will see more credit unions like Ohio Healthcare that can see the benefits in opening up lines of communication between the credit union and local auto dealers.

When asked what advice he would give to other smaller credit unions looking to drive growth into their portfolios, Butler said, Use this opportunity to get your foot in the door with these local dealers that might have discounted you before. Regardlessof your size, if a dealer doesn’t know you exist, they can’t take you seriously. Butler also noted that now is the perfect time to break down those barriers, as much of the auto loan business they are doing now comes from dealersunaware of the credit union just one year ago. Now is a great time for smaller credit unions to help level the playing field, creating relationships that can continue to drive business even after larger banks and captives inevitably start to re-enterthe marketplace. Going forward, Mr. Butler noted that Ohio Healthcare would continue to make sure that regular dealer visits remain a top priority to continue to capitalize on the benefits that this current market has provided.

April 19, 2016

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