Indirect auto finance company CU Loan Source has doubled its origination volume since May 2020, largely due to a pandemic-spurred increase in consumer deposits at credit unions.
The Atlanta-based credit union service organization, which is owned by several Georgia-based credit unions, originates indirect auto loans for car dealers. As of May 2021, the prime lender’s monthly originations grew to about $165 million, up nearly 100% YoY, Kevin Usiatynski, chief strategy officer, told Auto Finance News.
Under the company’s model, CU Loan Source sells participation interest in the loans it originates to more than 100 credit unions across eight states, Usiatynski told AFN, noting that the company expects more credit unions to invest in the coming months.
The participation arrangement allows CU Loan Source to sell a portion of an auto loan to one or more credit unions, while retaining the loan on the company’s balance sheet and keeping a percentage, Usiatynski said. Credit unions who invest in the loans supplement their loan portfolios and benefit from using their capital to increase profit for their members.
In 2016, eight Georgia-based credit unions invested in CU Loan Source loans. Following an expansion effort started in 2017, that number stands at 105 as of June 2021, providing an opportunity for the lender to capitalize on increased funding and grow originations, Chief Executive Bill Moniz told AFN.
“The pandemic has forced folks to save more money than ever, so it’s given credit unions across the country increased liquidity,” Usiatynski said. Credit unions “want to take those deposits and go earn their members money. We’re an avenue where they can invest those extra deposits in a high credit quality asset that will turn over quickly.”
With increased capital from investors, CU Loan Source has grown to service 1,050 dealers across 18 states as of May 2021, up from 650 dealers across about eight states a year ago, Usiatynski said, adding the company is actively expanding into new states.
“As [investment has] grown, we’ve recruited experienced dealer relationship managers in states that we’ve targeted for expansion … we’ve had a tremendous reception,” he said.
CU Loan Source has also grown its managed portfolio to more than $2.4 billion as of June 2021, up from about $1.2 billion in 2016, Moniz said. The company serves more than 100,000 customers and has originated $8.9 billion in auto loans in its lifetime.
Meanwhile, CU Loan Source is improving digital capabilities for dealers amid an “explosion of interest,” Usiatynski said. By the end of June, all CU Loan Source dealers who use RouteOne will be able to offer e-contracting, and by the end of the third quarter, digital contracting will be available for the company’s dealer partners who use Dealertrack, he said.