The Indirect Auto Lending Route to Growing Loan Volume: Advantages and Challenges Credit Unions Should Consider


By Ed Swanson

Screen Shot 2014-01-21 at 10.31.41 AMI have given PowerPoint presentations at credit union league lending events and annual meetings titled “Indirect Auto Lending: The Good, the Bad and the Ugly” for a number of years where I’ve shown that the indirect auto-lending arena has brought good news for everyone—members, credit unions and dealerships—in the credit union movement. However, not all of the news is great. I’ve discussed bad news as well and have shared examples of CU indirect auto lending that ended in delinquency where charge-offs rose but were still manageable. I’ve also discussed the nightmare stories we’ve all heard that involved NCUA coming in and taking over credit union management because an indirect loan program was allowed to run amok, which is very ugly news indeed.  

The fact remains, however, that, when properly managed, indirect lending can play an important role in helping credit unions accomplish some of their most critical strategic goals. Indirect lending can help:

  • Increase loan volume
  • Build new member growth
  • Increase revenue and
  • Provide a convenient point-of-sale one-stop shopping tool for consumers at local auto dealerships.

Over the years, credit unions have earned a reputation for being the first place consumers should turn to for quality auto loans. But, in this increasingly competitive financial services marketplace, the industry still has a long way to go if it is going to grab it’s full fair share of new and used car financing. Credit unions can appropriate a larger market share by establishing and maintaining a successful indirect lending program, but doing so requires careful and continued vigilance on the part of credit union management.

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