By John San Filippo
Direct auto lending is great for a credit union, at least from a financial standpoint. However, from a member experience perspective, it can leave a lot to be desired. Indirect lending can help build a portfolio, but it can be an inefficient and ineffective way to lend to a credit union’s existing members.
Fixing the Problem
An entirely new channel puts members in control and keeps the credit union loan front and center throughout the entire auto-buying process. That’s the premise of a new CUSO, CU LIFT Fund LLC. Finopotamus spoke with President Paul Rindone about the company’s FastPass mobile lending platform.
“Credit union auto lending is broken, and the numbers bear this out,” said Rindone. “No matter what group you look at – even the biggest indirect lenders – credit union penetration rates for auto loans hover around 20%. So, if we assume most members financed a vehicle somewhere, roughly 80% of members got their cars financed through somebody else. As an industry, we can do better.”
According to Rindone, the biggest problem with the current system is that auto dealers control almost every aspect of the auto buying and financing process, resulting in many credit union loans being lost to dealer financing. “I can’t blame the dealers. They’re out to make money just like everybody else,” Rindone told Finopotamus. “But the deck is stacked against the member and the credit union. Once the member leaves the branch with their loan approval, the credit union relinquishes all control. And when the member gets to the dealership, they’re faced with a team of professionals who do this for a living.”
A Better Online Shopping Experience
Online shopping is supposed to make the buying journey easier for consumers, but Rindone said that’s often not the case. “If you’ve ever used one of the big-name auto shopping sites, you know it seems great at first. You get to browse the inventory from all the dealerships in town,” he noted. “The problem is that to actually do anything on the site, you have to surrender your contact information. That’s where the nightmare begins.”
Rindone explained that multiple auto dealers may purchase the consumer’s contact information from that website. This can lead to the consumer being inundated with calls, texts and emails from several dealers, each one looking to edge out its competitors.
“It’s a big mess, but we believe we’ve solved it,” said Rindone. “Our FastPass platform addresses all these issues and truly puts the member in control.”
The FastPass experience begins when the member downloads and authenticates inside the FastPass web app. This loads all their loan approval information – amount, rates, terms, etc. – on their smartphone or other mobile device. At this point, the member has access to several tools:
A live FastPass Advisor. The FastPass Advisor is available through in-app messaging to answer questions and guide the member’s journey.
Buying capacity calculator. A common mistake among auto buyers is assuming that they can buy a vehicle with a price equal to their approved loan amount. The buying capacity calculator helps the member determine how much car they can really afford.
Viewing participating dealer inventory. Members can use advanced search features to browse and identify vehicles that meet their criteria. When they find a vehicle they like, they can save it to their virtual garage to compare later to other garaged vehicles.
Anonymous dealer communications. When the member finds just the right vehicle, they can discuss it anonymously with the dealership. That means no barrage of calls, texts and emails from multiple dealers.
The CUSO is also working with Reseda Group to build a closed-loop, proprietary payment network to facilitate instant loan funding at the point of sale. This is expected to launch in the second quarter of 2025.
Getting Dealers Onboard
Finopotamus asked Rindone what incentive the dealership has to participate in the program. “Dealerships can spend $400 or more on leads for every deal they close. We eliminate that expense because we guide members to participating dealers with no charge to the dealer.”
Another benefit to dealers, according to Rindone, is the dealer’s ability to sell additional products – as long as they fit within the loan approval amount. “Some credit unions tell members not to buy GAP (guaranteed asset protection) coverage or MBI (mechanical breakdown insurance) through the dealer so the credit union can add it to the loan later,” explained Rindone. “Under the FastPass program, our credit unions let the dealers include those products as long they don’t go over the approved amount. Once the loan is funded, the deal is done.” He added that instant funding will also boost dealer cash flow.
The key to FastPass success will be loan volume. “Our goal is to establish some real clout with dealers nationwide,” said Rindone. “We can help any credit union close more auto loans today, but the real power will come as we scale. When we get to a hundred credit unions, we’ll get noticed. A thousand credit unions and we’ll have some real juice.”