Once upon a time, the road to buying a car usually included a stop at a lender.
This route has often been circumvented with the proliferation of indirect lending in recent decades. Even more recently, online lending platforms like Carvana, Cars.com, Shift and Vroom have taken traditional lenders even further off the beaten path.
This is an existential question for credit unions.
Paul Rindone, vice president of CUNA Mutual Group who leads its initiative to develop auto loan options for credit unions, called it the “30-20” problem: As credit unions continue from holding about 30% of US auto loans, they’ll now only make about 20% of the loans.
“Our mission is to change that,” Rindone said.
As one of its responses, CUNA Mutual Group announced a plan on January 20 that would allow credit unions to be the first stop for online car purchases using an online online platform. white label called CarSaver. It is also reported that its venture capital arm, CMFG Ventures, has invested “substantial funds” in CarSaver.
Rindone said the CarSaver program will complement CuneXus, a Santa Rosa, Calif.-based fintech company that CUNA Mutual bought in 2020 that offers online loan approvals.
A credit union that signs up for CarSaver can create its own storefront, endorse its own dealers, and direct members to its site. There, they can not only get approved for a loan through the credit union, but also choose and buy their car.
“We’re trying to help credit unions leapfrog by bringing more fintech into a solution that they can implement with a small project, because everyone is running out of resources,” Rindone said.
CarSaver Management, based in Franklin, Tennessee, just outside of Nashville, was founded in 2016. The following year, Wal-Mart and Auto Nation began using the platform to sell cars, in using Ally Financial as their preferred lender.
The private company doesn’t release sales figures, but its platform worked well enough to convince Nissan to adopt it last February to power the [email protected] online sales experience. Automotive News was impressed enough last October to award CarSaver one of its PACE awards, which recognize automotive suppliers for superior innovation and technological advancement – in this case, for creating a 100 car buying platform % online from start to finish.
Unlike Carvana, CarSaver does not have an inventory. And unlike Carvana, CarSaver works with existing dealerships. Which also means that, unlike Carvana, CarSaver can sell new cars, not just used cars.
For credit unions, there is no upfront cost to use the platform. Instead, it relies on a revenue sharing model similar to indirect lending.
Rindone said the model is attractive to dealers as well as lenders.
“They get approved buyers. It’s not a lead; it’s someone who first went through a buying process and a transaction,” Rindone said.
For dealers, this means they also have lower spend per sale.
Credit unions have built decades of trust with their members as sources of fair loans at good rates. But when a member walks into a dealership, they more than likely come out with a loan from another source. Banks have a similar problem.
“The retention rates for everyone are bad,” he said.
Rindone repeated the familiar adage to all lenders: “Members don’t shop for a car loan; they buy a car.
“We bring the buy event and the borrow event together on the CarSaver platform,” he said.
CarSaver is designed to manage all aspects of the process, from purchase to home delivery, if required. In addition to that, Rindone said he developed an “automated upgrades” program to maintain the relationship with the buyer (and borrower) by identifying them when they might be ready for a new vehicle.
Credit unions approve the marketing materials and strategy, but they don’t have to invent them.
“It’s pretty turnkey,” he said. “When a member is eligible for an upgrade, they will lead the campaign for the credit union. The campaign could even include a live phone call to a member. »