ONTARIO, Calif.—CU Direct credit unions collectively becoming the No. 1 auto lender in the nation is a feather in the cap for the company and its CU partners, says Tony Boutelle, who emphasizes that the accomplishment means even more for the credit union movement.
“The biggest thing is that credit unions are winning in auto lending, and that is just a really good thing to say now,” said the CU Direct president and CEO. “Credit unions are simply doing a great job, and they know how to be successful in indirect lending. This is definitely good for the credit union brand.”
Mid-year data shows CU Direct credit unions have passed Capital One, which is now ranked No. 2, to claim the top spot in total loans. CU Direct CUs have underwritten 568,000 auto loans through June. Capital One stood at 566,000. Wells Fargo is third at 376,000.
Boutelle emphasized that credit unions have become very good partners with their dealers, adding that being local does not hurt.
“Credit unions are community leaders, like a lot of dealerships are,” said Boutelle. “They work in the same community as the dealers, who often don’t even really know who they are working with when it comes to the national banks.”
The steady rise in the national ranks of 1,100 CUDL platform CUs, moving up from No. 3 in total loans to No. 1 in less than two years’ time, parallels how credit unions are moving up their overall share of the auto lending market.
“The entire credit union community is approaching 30% share in balances and 26% share in transactions,” said Boutelle. “We have seen credit unions claim a 4% market share increase in the last two years, and some of that came directly from banks, which in that same time lost 5% in share.”
Some analysts have suggested that most of the credit union market share gains has come from banks pulling back on subprime due to growing defaults in this FICO class. But while some of the movement’s gains can be attributed to banks stepping back a bit, what really is doing the job for the cooperative movement, noted Boutelle again, is credit unions being better competitors and learning more about winning in the indirect space.
“Sure, banks have record profits, and they may be looking at higher profitability in other markets and are focusing some of their energy there,” said Boutelle. “But the banks are not leaving this space—the Ally Banks, the Wells Fargos, the Chases, will continue to compete heavily. But, bottom line, banks overall are not competing as effectively for auto lending as credit unions are now.”
For example, Boutelle emphasized that CUs do not play heavily in subprime, meaning that credit unions are not truly grabbing a great deal of the share that banks are giving up.
“Credit unions have never gotten involved in subprime and near-prime lending as aggressively as the banks have,” he said. “What is then happening now is banks are pulling back from being full-spectrum lenders.”
Big Climb For CUs
As for credit unions on the CU Direct platform now moving into the No. 1 lender spot, Boutelle emphasized the mountain credit unions on its platform have climbed.
“This is a pretty big deal, given that these credit unions don’t come even close to these trillion-dollar banks in asset size,” said Boutelle.
What has helped CUs on the CUDL platform improve, insisted Boutelle, is taking advantage of all the platform delivers.
“We have worked closely with our credit unions in a collaborative effort for a long time—determining what their needs are, especially from a technology standpoint,” said Boutelle. “What is different about our platform from some of the other things that are out there is that with those other options credit unions have to piece together a lot of different parts—a front-end piece, a workflow piece, a decisioning and funding piece. We have put all of that into one package for credit unions to work more seamlessly through this entire indirect lending process. We have delivered a lot of real efficiencies, and credit unions have done an excellent job of executing to build a core competency in all aspects of indirect lending. They work with dealers well, they fund fast…all the things you need to do well with indirect.”
Boutelle added that CU Direct credit unions—which experienced 18.2% growth in 2017 through June—are taking advantage of the company’s website tools to provide members with an excellent experience throughout the entire car shopping and car-buying experience.
Indirect Boosting Membership
Boutelle said it is interesting to note that CU indirect lending numbers fare best in states that have the largest share of credit union members to the total population.
“I can tell you that in the states that have the higher percentages of members to total population you’ll find credit unions with some of the best indirect lending programs,” said Boutelle.
As credit unions post record membership gains, indirect lending has played a key role, analysts have stated.
“I know there is this concern about these folks not becoming real members, using the credit union only for the loan,” said Boutelle. “But I know credit unions today do a better job of making these indirect borrowers real members over time. If they get 10%-25% of these indirect members to become real members, indirect lending becomes a substantial foundation for the credit union to continue to build its future on.”