Credit unions have been increasing their share of the auto loan business. The financial organizations controlled 21.3% of the market at midyear 2018, compared with 20.3% at midyear 2017, according to Experian. But, like other lending institutions, past performance is no guarantee of continued success.
Ben Wire, Forum Credit Union’s dealer division manager, recently spoke to Auto Finance News about the competitive landscape for credit unions. Wire provided his take on the business, saying credit unions will take even a larger share of the auto finance market. He also spoke about Forum Credit’s plans to grow.
Wire has served in his current role for 14 years. Previously, he worked as an underwriter and originator at now-defunct Union Acceptance Corp., for nearly a decade. What follows is an edited version of AFN’s interview with Wire.
AFN: Many lenders steer away from longer loan terms, but you previously told AFN this was the credit union’s most competitive segment. Is this still the case?
BW: Yes, it is. The reason being that the prices of automobiles are still substantial, and people still want to get the level of car that they’re used to. To do that, they’re going to have to get into a longer term.
AFN: Have some of the risks of long-term loans hindered the credit union?
BW: It hasn’t been the case for us. Our extended term max is 81 months; other credit unions go longer. We control our risks by only allowing the extended term on certain automobiles. Our standard is to only do advanced terms on units with less than 70,000 miles and a book value of $15,000. There are times we have to tell a customer they don’t want to go with a longer term, but it depends on their income and the overall financial picture that we get from the credit bureau.
AFN: Will credit unions increase their share of the auto loan market?
BW: Credit unions’ share of the market will continue to grow because we’re more agile than a larger lending institution. If we need to develop a program by talking with our members, we can create or change a program right away. We don’t have to get an OK from a corporate office 1,000 miles away. We’re evolving, getting bigger, and we’re trusted, among other factors in our favor. Because we’re closer to our members, we become trusted advisors.
AFN: What is the competitive landscape like in Indiana?
BW: We can lend anywhere in Indiana, but our main footprint is central Indiana. And we certainly have room to grow. One thing we have to do is make sure that we grow at a rate where we can service our members at a high level. Our main strength is our superior service. We can’t do that if we’re constantly growing. We can grow, but we want to control our growth. In our area, we have the top marketshare in used-car loans, and in the top marketshare overall, we’re usually second or third — which is truly amazing when you consider the financial institutions we’re competing against. These institutions have a lot more branches and resources than we do. But if you include the other credit unions we partner with, within our branch network, we can compete with the Chases and the Fifth Thirds.
AFN: What do you anticipate will be the greatest challenge to auto finance this year?
BW: Right now, things are slowing down. As far as sales, there’s a lot more competition for what’s available. We’re seeing more and more lenders coming into the market or changing their programs to try and match ours. For us to continue to succeed, we’ll need to be smart about the competition and looking at what’s going to be healthy for the credit union in the long term. There are lenders that come in with very low rates. They buy their way into our market. But we just stay consistent in the way we do things. Granted, sometimes a lender comes along with a very low rate and we lose business. But our members are our owners, and our loans must be the right loans, the right pricing. We’re not going to try to buy our way into the market; we’re already there.
AFN: What’s your top priority?
BW: Our top priority right now is making sure that we’re looking toward the future as far as e-contracting and coming up with a better mobile solution for people who want to buy a car on their smartphone. We want to make sure we’re more at the cutting edge and not playing catch-up all the time — which I don’t think we do, but we want to be more cutting-edge than our competitors. As far as e-contracting, we’re working with RouteOne. As for the mobile app, there are some ideas we’ve been throwing around. However, we’re kind of in the investigative stages right now. Ultimately, we want to remain relevant and helping our members buy cars and still retain that dealership relationship.
Editor’s note: This story was originally featured in the January edition of Auto Finance News’ digital magazine, out now.