The automotive industry is seeing slowing new car sales, rising interest rates, a widening gap between new and used vehicle payments, and tightening dealer margins. Dealerships can embrace relationships with credit unions, both as a source of financing and in other unique ways, to boost profitability amid these changes.
Why Dealerships Should Form Partnerships with Credit Unions
The same factors that are making waves in the industry at large are the reasons why it's a good time for dealers to expand their relationships with credit unions. Credit unions may be able to help stores boost profits in more ways than one, but it starts when they’re chosen as a source of financing.
Credit unions make perfect partners in the current landscape of rising new car prices and interest rates. As the gap between new and used vehicle payments grows, more customers – even many with good credit – are turning to used cars as they look for ways to keep things more affordable. It just so happens that credit unions make most of their income with used vehicle loans.
According to Experian's latest State of the Automotive Finance Market report, credit unions accounted for 19.9% of all financing originations in the first quarter of 2019, which trails both banks (32.4%) and captive lenders (28.8%). When you only consider used car financing, however, credit unions' share of the market checks in 26.0%, which is second only to banks (36.3%).
Evidenced by credit unions' strength in the used vehicle marketplace, it's clear that dealers can benefit by being able to provide them as financing options for customers, especially if your store is trying to sell more used cars. Plus, credit unions may be able to offer better rates than some of your store's other lending partners, which opens up room for customers to finance aftermarket products.
There are so many ways credit unions and car dealers can work together to keep business thriving. Dealers can put financing options through credit union partners on their websites to allow shoppers to explore what's available to them online, which is increasingly important these days. Credit unions could return the favor by hosting inventory listings on their own websites for members to peruse.
Both credit unions and dealerships thrive on customer loyalty. Imagine how powerful it could be if credit unions told their members about their trust in your dealership? These members already trust the institution when it comes to handling their money, so it could establish a groundwork of trust in your store before these prospects ever even step in the door.
2 Other Ways Credit Unions and Dealers Can Work Together
At the CU Direct Drive '19 lending conference in Las Vegas that took place in May, dealer panelists talked about additional ways dealers and credit unions can work together. These two ideas stood out as avenues to boost profits and strengthen relationships:
- As an inventory source – Oliver Young, the director of sales for the Young Automotive Group of Utah and Idaho, says dealers can find good inventory through credit unions. Ask any partner or local credit unions for the first chance at cars they repossess before they send them to an auction or wholesaler. Credit unions may also know of members who want to sell their vehicles that they could send along to your store.
- In the service lane – Similar to how manufacturers offer free maintenance, credit unions and dealers could partner up to do something similar. Dealer service departments could offer certain free services or discounts to members of partner credit unions, and also benefit from the additional income opportunities this presents.
The Bottom Line
Credit unions have expanded their reach in recent years, so forming partnerships with them can be a great way for your store to combat current market conditions.
Teaming up with Auto Credit Express is another way dealerships can boost their bottom line. We’re one of the nation's top providers of special finance leads, and we also offer new and used car leads through our partnership with CarsDirect Connect. Our exclusive, high-quality, and down-funnel leads are serious and ready to buy.
Learn more about how we can help your store by giving us a call at 888-535-2277. Don’t have time to talk now? Fill out the contact form on our website and we'll get back to you!