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Can Instant Payments Lead to More Auto Loans?

Paul Rindone, President, CU LIFT Fund


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The short answer is yes. But the bigger question is, how can instant payments – or more accurately, instant funding – lead to more auto loans?


Before I answer that, lets step back and look auto loans are originated today. Three important points come to mind:


  • Members are looking to purchase a vehicle, not a loan. When we buy anything, we want to push the “easy” button. Easy and fast win the day.

  • Dealers originate 80% of all automobile loans. Dealers understand the buyer’s priority is the vehicle, so they “embed” vehicle financing into the purchase process.

  • The dealer’s embedded process is often easier for the member than the credit union’s process for direct loans.


As much as your members love you, most of them will drive the road of least resistance when buying a new car. It takes real member commitment to obtain a direct auto loan. Sometimes this involves the member shuttling documents back and forth between the dealer and the credit union. Sometimes it involves the member delaying drive-off. Sometimes members are instructed to get financing through the dealer and then come in for a refinance.


However, the dealer process generally involves a generic presentation of the financing, keeping the dealer’s options open to assign the loan to their lender of choice. Many times, this results in your member being sold to another financial institution who can then chip away at your relationship with your member.


To make direct auto loans more attractive for everyone, we clearly need to start by looking at the member experience. The goal is providing members with a vehicle purchase experience – including credit union financing – that is easier than the dealer-led experience. A well-prepared member with a well-designed member experience is your fast pass to funding more direct auto loans. The trick is making credit union financing attractive to credit unions, too.


This is where instant funding comes in. The sale of a vehicle results in payables and receivables, but most people don’t stop to think that until that check from the credit union shows up, the dealer is in the red on that deal.


CU LIFT Fund has created an auto finance and purchase ecosystem that solves all of these problems. The cornerstone of the program is the proprietary closed-loop payment network that we’ve created to fund direct auto loans instantly. That’s right. By the time the member drives off the lot, the dealer will have already been paid.


What does this mean to the member? The member can walk into a dealership with the confidence of a cash buyer, knowing they won’t have to haggle over financing. They negotiate their best price, agree to any add-ons, and as long as the total cost is within their approved loan parameters, they pay for the car using our FastPass webapp and they’re on their way in nothing flat.


What does this mean to the dealer? First, participating credit unions steer their members to FastPass dealers, giving the dealer access to high-quality buyers who have already been qualified for financing and are ready to purchase. What’s more, participating credit unions agree to support the dealer’s protection products.


Frequently members will trade in their existing vehicle, giving the dealer the opportunity to acquire hard-to-find used vehicles that they can resell. In exchange for supporting the FastPass process, the dealer gets all these benefits – for no charge.


Finally, there’s the matter of that instant payment. If I owed you $50,000, would you rather I give it to you right now or some time later? Dealers are no different. Cash flow is an issue for every business and being a FastPass dealer gives the dealer cash flow like they’ve never had before.


We’re putting everything in place to allow credit unions to close significantly more direct auto loans. The one missing piece is marketing. If you don’t tell the members you have a better way, they’ll never know. Encourage members to think the same way about financing their next vehicle and you’ll be on your way to tremendous direct auto loan growth.


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