Bad Credit Auto Loan: Can Credit Unions Hold Their Market Share In The Long Run? |
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You may have wondered about
bad credit auto loan dealerships being against credit unions dealing in financing dealership vehicles. The reason is probably their inability to make the same profit from credit union members if credit unions did not exist. You aren't wrong if you've thought dealerships are against credit unions. Dealerships also appear to have a different opinion of credit unions compared to captive finance companies or local banks. For years now people first approach the car dealer for a bad credit auto loan before credit unions for financing needs. The typical impression is of auto dealers handling cars and trucks and the financial services industry particularly credit unions dealing with the financing. However, this assumption would not be accurate any more. External competition is in all directions. Today's bad credit auto loan lenders have a variety of options in financial choices for the members. Most often, the financial institution preferred is not the member's credit union. As a result car dealers and credit unions have mostly experienced clashes of interests over the years. The auto lending market share of the credit unions has witnessed a moderate increase in the past few years. However now they find themselves with a shrinking market share each month. Credit unions feel that mortgage refinancing in recent times has made a significant difference on the bad credit auto loan market share. Some consider the increase in home equity loans to have taken over the lost market share. Others are more convinced about leasing being to blame for it. However none of these beliefs have any basis. In the past four years, vehicle sales have ascended to new heights. The Internet undoubtedly has grabbed a share of sales. Vehicles sold online in the past year number almost three million. It is equivalent to capturing three million potential consumers of bad credit auto loan away from the market. The fact is, it may not bother you at present but later, it certainly will. Unfortunately many credit unions are not likely to take the threat seriously enough to act on it before it's too late. The question is then, whether there is anything the credit unions are capable of doing in order to combat the trend without ending up as dealership pawns in the indirect business. A solution is certainly available. Relatively new to the market, the solution will enable credit unions to be competitive with dealers of bad credit auto loan in the near future. Usually a customer approaches the credit union first for a bad credit auto loan. In addition to financing, the credit union will actually find the vehicle for the member, fix the best price and deliver the car if required. Not to be confused with a broker, here the credit union being referred to has an in-house program with which it can identify the member's chosen vehicle thanks to links with a number of local dealerships or dealerships across the state, region or nation. An internal auto adviser, a credit union employee is the one who handles all these operations. The credit union is able to link up with many local dealers offering bad credit auto loan connected to the network. Through the Internet, the request is then communicated to the dealers, with dealerships quoting the desired price. Then the auto adviser notifies the member of the best price and if accepted, completes the application and closes the loan. Then the auto adviser either gives a check to the member who simply has to drop in to the dealership to claim the vehicle. The best thing about this scenario is that the members don't go to the dealership before choosing their vehicle and securing a bad credit auto loan with the credit union. It is in direct contrast to the reality in vehicle purchase and finance with the credit union in possession of this advantage. Despite being a relatively new concept, it is currently being utilized at various test sites and appears highly promising as a means for credit unions to restore their auto financing market. Computers and competition will remain but it's still early enough to join in the game with this new approach to serving members' auto financing needs. |
