Managing the Demands of Indirect Auto Lending

Indirect auto lending is important to your financial institution and to car buyers, so it’s important to Open Lending, too.

Indirect auto loans are more convenient and faster for your borrowers, and financial Institutions will continue to have success with indirect auto lending if they are making consistent loan decisions, fast with funding, flexible with loan prices and underwriting and staying in contact with dealers during the COVID-19 pandemic, according to the $1.4 billion dollar Honor Credit Union in Berrien Springs, Mich., and the $3.3 billion dollar Knoxville TVA Employees Credit Union in Tennessee, during a webinar hosted by our great partners at CU Direct. As long as dealers have the inventory, high consumer demand for auto lending at the dealerships is a must. Partnering with Open Lending can help your bank or credit union manage that demand.

Learn more about our Lenders Protection platform here!

Open Lending can help your financial institution safely reach new members and earn greater interest income from the applications you already have. Meritrust Credit Union in Wichita, Kansas, partnered with us to help revive their indirect lending portfolio after it experienced higher than normal losses. Heather Gates, the Consumer Lending Director at Meritrust, knew that their indirect lending program needed a strategy to lend across all credit tiers again with the proper risk mitigation in place, and that is where a partnership with Open Lending came in. Since partnering with Open Lending’s Lenders Protection in the summer of 2017, Meritrust has had tremendous success with its indirect lending portfolio, including its partnership with AutoPay, to which Open Lending introduced the credit union.

Partnership with Open Lending also can help deepen relationships with your indirect borrowers. After working with Open Lending, Leaders Credit Union in Jackson, Tenn., has been earning a 2.8% spread on indirect loans made through the partnership and converts the 80% of indirect loans into multiple product-using members at a rate of 30%. Trent Taylor, Leaders’ VP of Indirect Lending, said dealers were happy to be getting more approvals from Leaders, so they receive more loans up and down the credit scale. Car dealers particularly appreciate the faster turnaround times.

Before working with Open Lending, decisions on loans to credit-challenged members were taking six to seven minutes; after, it’s six to seven seconds, which saves Leaders nearly 20 hours per month. Not only is Leaders CU able to say “yes” to far more loans, but the credit union is protected with default insurance. Leaders’ indirect borrowers now have a faster and easier way of being processed that protects the financial institution as well.

Open Lending also wants to help lenders keep your dealers happy and maintain a positive relationship with them. In a partnership with Open Lending, Amarillo National Bank in Texas was seeking to expand its risk appetite while mitigating that risk, so the bank could better serve its community, shareholders and its dealer partners.

Amarillo National Bank Senior Vice President John T. McElyea explained, “In our region, we’re a big indirect lender, but one of the things we’re missing out on – our car dealers needed and wanted extended terms on higher mileage vehicles. That wasn’t in our risk appetite.” Open lending offered the solution with Lender Protection.

“The dealers have been very receptive to it,” McElyea said. “We booked 39 deals in our very first month, which I think was very, very good. It’s been a very, very huge benefit for our dealers and for our customers that, normally, we wouldn’t be willing to take those loans on ourselves. But now that we have the backing through Lenders Protection, those are loans that we’re able to help our customers with. ”

Open Lending knows positive relationships with your dealers is a key part of nudging those dealers to send new borrowers to your institution. We want to help you keep your dealers happy.