J.D. Power: Credit Unions Increase Indirect-Lending Market Share
WESTLAKE VILLAGE, Calif. — Credit unions are becoming increasingly assertive in the indirect-lending market as they simplify the process for dealers, according to a recent J.D. Power and Associates study.
J.D. Power's 2006 Consumer Financing Satisfaction Study found that credit unions are more often forming alliances with dealers to offer new-vehicle financing. More specifically, credit union transactions now represent nearly 10 percent of loans being issued in dealerships, up from almost 7 percent in 2005 and 3 percent in 2004.
In order to drive business, credit unions are offering more favorable rates through indirect-lending channels, thanks in part to the tax advantages gained from their nonprofit status, J.D. Power explained. In addition to offering better rates, these financial institutions are also providing longer-term loans.
"As the new-vehicle financing environment adjusts to increasing rates and compressed margins, credit unions are positioning themselves as strong competitors to the established captives, banks and independents, which is underscored by the fact that credit unions have historically provided excellent customer service through their very close, personal ties with their customers," explained David Lo, senior research manager of auto finance at J.D. Power.
"From the dealer perspective, credit unions are currently competing primarily on their rates and terms," he continued. "Captive providers still have a significant advantage in other offering-related areas, such as more competitive reserve and overall compensation per deal."
Overall Finance-Provider Satisfaction Down
J.D. Power also reported that overall finance provider satisfaction dropped for the year, mostly due to a broad-based shift in interest rates.
The company discovered that the top factor in the overall decline is the industry-wide effect of increasing federal funds rate, which has resulted in all providers raising their rates.
J.D. Power Honors High Ranking Financial Providers
Ford Credit took top honors from J.D. Power in the luxury lease segment for its second year in a row, standing out for its provider offerings. In the non-luxury lease category, Ford Credit also topped the rankings for its fifth consecutive year, receiving high marks for provider offerings and its application/approval process, according to J.D. Power.
Meanwhile, GMAC ranked highest in the luxury loan segment for its second year, excelling in payment/billing and application/approval process, J.D. Power said. GMAC was also honored in non-luxury loan satisfaction, receiving the highest ratings from customers in three of the four categories that determined overall satisfaction – payment/billing, provider offerings and application/approval process.
When it comes to customer satisfaction with e-contracting, J.D. Power said it's strong. On average, a customer whose contract was processed through e-contracting technology is more likely to be "delighted" with the overall application/approval process, as opposed to a customer who completed the traditional application and documentation process to get approval, according to officials.
"Currently, only 3 percent of customers report that their contract was processed using e-contracting," Lo pointed out. "While the current penetration is very small, this proportion is likely to increase soon.
"In our 2006 Dealer Financing Study, we found that 75 percent of dealers who currently use e-contracting expect the number of contracts processed with this technology to increase within the next 12 months," he concluded.
The specific rankings by J.D. Power are:
Initial Lease Satisfaction Index Ranking for the Luxury Segment
Ford Credit: 830
GMAC: 802
Mercedes-Benz Financial: 798
Lexus Financial Services: 791
Luxury Lease Segment Average: 781
Audi Financial Services: 771
Honda Financial Services: 770
BMW Financial Services: 768
Infiniti Financial Services: 751
Initial Lease Satisfaction Index Ranking for the Non-Luxury Segment
Ford Credit: 794
GMAC: 787
Honda Financial Services: 765
Toyota Financial Services: 764
Non-Luxury Lease Segment Average: 760
Volkswagen Credit: 757
Chrysler Financial: 745
Nissan Motor Acceptance: 733
Initial Loan Satisfaction Index Ranking for Luxury Segment
GMAC: 798
Infiniti Financial Services: 790
Honda Financial Services: 788
Lexus Financial Services: 784
Mercedes-Benz Financial: 773
Ford Credit: 760
Luxury Loan Segment Average: 753
Chase Auto Finance: 693
Initial Loan Satisfaction Index Ranking for Non-Luxury Segment
GMAC: 773
Ford Credit: 756
Volkswagen Credit: 754
Toyota Financial Services: 744
Honda Financial Services: 736
Nissan Motor Acceptance: 729
Non-Luxury Loan Segment Average: 723
Chrysler Financial: 715
Hyundai Motor Finance: 711
Bank of America: 697
Mazda American Credit: 693
CUDL Launches Research/Shopping Site for Credit Unions
Earlier this year, CU Direct Corp., which administers the Credit Union Direct Lending program, unveiled its next-generation vehicle research and shopping Web site for credit unions and their members.
According to officials, the redesigned CUDL AutoSMART site was created to offer several new enhancements, provide improved user-friendly navigation with increased research capabilities and streamline the vehicle shopping and research experience. It also features an expanded library of auto shopping resources.
Executives explained that credit unions can customize more of the content and features that they offer to their members through the new site, which can help drive member financing.
Additionally, CUDL AutoSMART dealers can benefit, since the new site offers them the ability to list their vehicle inventories and photos, officials highlighted. Dealers also have the opportunity to update inventories directly from their DMS system on an hourly basis.
To offer a range of new and comprehensive vehicle information, images and research capabilities on the redesigned site, CUDL partnered with Edmunds.com.
Through this partnership, Edmunds.com provides the CUDL AutoSMART site with Edmunds.com True Market Value for new and used vehicles, Edmunds.com rebates and incentives, new-vehicle configurator, new-vehicle comparisons, in-depth vehicle reviews, along with vehicle safety and warranty data.
"We are very excited about teaming with Edmunds.com and incorporating their extensive vehicle intelligence into the CUDL AutoSMART Web site," said Jerry Neemann, senior vice president and chief operating officer of CU Direct, when the announcement was made.
"Our goal is twofold: To provide our credit unions with a site that will both help increase member retention and grow their auto loan portfolio, while also providing members with the most sophisticated, complete vehicle research and shopping Web site available today," he continued.
Mike Benavides, director of business development for Edmunds.com, noted, "CUDL and Edmunds.com both aim to empower consumers in the car-buying process. This collaboration allows CUDL's 17 million members and other CUDL AutoSMART Web site users to benefit form Edmunds.com's established, trusted, pricing, data, images and editorial content."
Remarketing for Credit Unions
For credit unions looking to improve remarketing results or learn more about the process, TitleAuctions provides an educational online seminar titled "The Three 'R's of Internet Remarketing."
TitleAuctions executives said the online seminar is delivered monthly and is free of charge to credit unions. Additionally, the company said it is making the same content available through in-person presentations arranged with state leagues and regional chapters.
"Credit unions need to better understand what the Internet can and cannot do to improve their remarketing results," explained Mark Coleman, chief executive officer of TitleAuctions.
"When used haphazardly, the Internet can be a real distraction. However, as an integral part of an overall remarketing strategy, the Internet can produce measurable improvements in collateral sales cycles and sales prices," he added.
Executives explained that the seminar lasts about 30 minutes and touches on the resources required for effectively using the Internet to remarket collateral. The seminar also discusses some of the legal questions surrounding the Internet as a remarketing venue, as well as how an Internet-based program must fit within the unique culture of the credit union, continued executives.
Participating credit unions will receive a checklist of items to consider, as well as suggested resources for addressing checklist items, according to TitleAuctions.