Why Dealers Are Riding High on the Credit Union Wave

Credit unions provide aggressively competitive rates that ensure deals with deep product penetration, and have little cancellation risk


Credit union lending’s prevailing strength is filling the profit sail for increasing numbers of auto dealers.

Data shows credit unions provide aggressively competitive rates that ensure deals with deep product penetration, and have little cancellation risk.

Credit unions have become a valued partner for dealers, providing excellent locations to go to get paper bought, and an additional channel of comparative lending.

Recent auto loan data confirms the robust position credit unions enjoy. Credit unions held 19.2% of the vehicle-finance market share, according to Callahan & Associates, and as a whole experienced almost 12% loan growth through year-end 2017, leading all lender types.

Dealers increasingly recognize credit union members’ affinity to their local communities—and their credit union’s endorsement of local businesses, including auto dealers.

For credit unions and auto retailers, the credit union member is a good prospect. With more than 5,500 credit unions nationwide, representing more than 110 million credit union members, one in three Americans—and half of all employed Americans—are credit union members.

This growing presence is rooted in credit unions’ relationship-building action with dealers. When dealers are more aware of how credit unions can help them sell cars more profitably, they are more proactively inclined to promote credit union financing to all shoppers, not just credit union members.

One example is Ed Bozarth Chevrolet of Las Vegas, which did not capitalize on the credit union market until about 18 months ago. “We just didn’t know credit unions well,” says Eric Lamont, senior vice president.

“Previously, credit unions were traditionally slow to approve, and because we do soft deliveries here, we needed a quick decision,” notes Lamont. Credit unions over the past few years have embraced new technology to make the funding process faster and more efficient, not to mention significantly growing dealer relationships.

“However, when we decided to grow F&I and reevaluated what we might be missing about our market, we became credit union ambassadors,” Lamont says.

For this store, this vigorous relationship means a net 10% deal growth at an average $400 per copy. “Any dealer knows that is important,” adds Lamont.

Like Ed Bozarth Chevrolet, the Ken Garff Automotive Group credits its growth to collaborating aggressively with local credit unions.

Headquartered in Utah, with dealerships in six states, the Garff group has promoted credit union options to customers for many years. “Out of 3 million people who live in Utah, for instance, 600,000 are credit union members, and the credit unions have done a good job investing in the indirect lending model,” notes Danny Cox, senior director of F&I for Garff Automotive.

Seventy percent of credit union auto loan portfolios are used cars, reflecting the used car finance market strength of these lenders.

Leveraging lending technology developed specifically for credit unions, dealers have easy and quick access to this deep credit union well to capture more deals they might not otherwise.

Dealers working with local credit unions have a market advantage—a flexible finance option that helps drive used cars sales. Moreover, dealers like using credit unions for new and used car purchases alike, because credit unions understand their members and consumer loan flexibility, and offer better rates than most other lenders.

Simply put, to effectively tap into the growing consumer interest in purchasing used cars to increase sales, gain new customers, and build brand loyalty, collaborating with credit unions makes good business sense for dealers.

“Credit union rates are very close to other lenders’ rates in our areas, but that advance—credit unions let us make a little more on the reserve,” Cox says.

Lamont agrees. “Using credit unions helps us retain more money for the F&I department,” he says. “The bank rate might be 5.9% for that buyer and the credit union 3.9%, so we save the customer money, and we know he or she will not go out and refinance on us.”

Both executives find the use of credit unions and this lending technology helps them expand their market presence. Dealers have the ability to approve deals within a few minutes while the buyer waits, whether for members or non-member buyers, to take advantage of credit union competitiveness.

Lamont says Ed Bozarth Chevrolet, which also must use its captive lender, completes 30% of transactions via this platform.

Ken Garff Automotive, which sold 111,984 vehicles in 2017, reports that 18.3% of all deals were through credit unions, and 64.3% of the credit union transactions were completed through the indirect lending platform.

Cox says it’s important dealerships get involved in their credit union relationships. “We talk a lot about our credit union relationships in our F&I training, about their importance to our business, and we give credit union reps availability and time to talk with us so we better understand their programs and how they can help us sell cars,” he says.

Cox notes that relationship-building should include looking for opportunities to market together. “We’re committed to credit unions” he adds.


One of his dealerships recently worked with Mountain America Credit Union to put on a holiday sale. The credit union took on event marketing and promotions activities. The sales kicker was a certain percentage off the buy rate and a free maintenance program.

Evan Etheridge is vice president of product management for CU Direct, overseeing product development at CU Direct. CU Direct’s CUDL Network is the nation’s leader in point-of-purchase and indirect lending services for the credit union industry, generating a record $39 billion in credit union auto loans in 2017. Connecting 14,000 dealers with 1,000 credit unions and the over 45 million members they represent, CUDL helps dealers get faster funding, sell more cars, and increase their profits.

Evan Etheridge

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