As finance director for Gunn Honda in San Antonio, TX, Tim Rivers knows a thing or two about forming strong relationships with credit unions to generate business for lender and dealer alike.
Gunn Honda and its parent company, Gunn Automotive, have indirect lending agreements with half a dozen credit unions. Rivers attributes the dealership’s success to the 25-year relationship that Gunn Honda has had with cooperatives. Although two credit unions work with the dealership through web-based tools like Dealertrack, Gunn Honda primarily finds credit unions through CUDL, an indirect lending network that connects cooperatives with dealers. Gunn Honda does the most business with Security Service Federal Credit Union, which issued more than $10 million in loans to the dealership’s customers during one recent 90-day period.
What makes a good indirect lending program?
Tim Rivers: Good relationships that are built up over the years on loyalty and respect. Good relationships are what this business is. We have to understand the credit unions and they have to understand us. We think they do a good job of that.
Is face-to-face contact important?
TR: It’s important. Most of the credit unions make a point of sending their sales reps to us from time to time or hosting events at which we can get together. It’s all part of building the relationship.
What can harm an indirect lending relationship?
TR: One way is for a credit union to have its indirect and direct lending efforts out of sync. Credit unions should send their indirect lending members back to us for a second or subsequent car loan rather than have them sign at the credit union with the direct lending program. The best credit unions do this and are consistent about it. Again, it’s part of building a trusted, well-functioning relationship. I’ll stop dealing with a credit union that does lobby lending with persons who come here first, want one of our cars, and then go to the credit union to get the loan.
What can help an indirect lending relationship?
TR: Consistency. When a customer comes in late on a Friday night and signs a contract, we need to know that we are going to get the funding. The best credit unions for us are the ones we know have been consistent over the years, so that we can count on service to a certain level. It’s important because here in Texas when a contract is signed it is binding from that moment. We need to feel we are working with a lender who will be consistent with the standards it has shown in the past. This is really key.
How can a credit union improve its consistency?
TR: It helps for a credit union to have a designated buyer per store. Of course, each buyer will have more than one store. But when that store calls, it’s a really good idea to have the call go to the same person as many times as possible. Some credit unions assign the calls randomly; that does not work as well for building a relationship. For example, when I call, I want a person whose standards I know, not someone whose standards I don’t. Of course, people are rotated so they don’t get stale, but consistency is something to shoot for. This goes for the supervisors of the buyers too; they should know and have a set relationship with the dealer.
What other things can credit unions do to make the relationship work better?
TR: There are variables in every potential sale. Don’t be so stringent you don’t have any flexibility.
New buyers are going to come in from time to time. What do you do then?
TR: New buyers can sometimes be aggressive, as in trying to establish a place in the market. We’d rather see them be conservative early on, and then grow with time and set a record by which they can be consistent. We don’t want to see buyers doing one thing, then changing or have change forced on them six months later.
What other elements are important?
TR: Payment should be swift. It makes our business people happy. Credit unions and dealers can work out their own agreements about flats and spreads. The better the payments are for the dealers the more they are going to like the credit unions but whatever the kind of payment, it needs to be swift.
What can credit unions do to improve their relationships with car dealers?
TR: Some credit unions have people who had earlier careers at dealerships. These people understand what our problems and needs are and tend to really help a relationship. Training can vary also; some credit unions could do better. I think going to CUDL conferences are helpful. Of course, we need to understand the credit unions and treat their members properly, carefully, and ethically again, it’s about creating a working, respectful relationship.
What technologies do you see coming along?
TR: I expect one day people won’t have to come in to the dealership, but we are not there yet. There are safeguards and we need to see a photo ID. But people can already pre-apply. They can do this with mobile apps. At the moment, we prefer using faxes rather than e-contracting. That may change.
Do you like using CUDL?
TR: We do. We like the fax-funding feature. Fax-funding is a large part of the operation’s success. We receive funding the same day, and that makes for a happy CEO, CFO, and accounting department here. Moving money quickly is something we really want, and the credit unions that do it best we are very happy with.