Indirect Lending: Changes In 2020 And Beyond

By John Flynn, Open Lending CEO & Chairman

The automotive industry as a whole has had to adapt its business model this year. Like nearly everything else in our everyday lives, the coronavirus pandemic has changed how business is done, and it’s no different for both dealerships and lenders. For credit unions that rely on auto loans for their business, this has hit them particularly hard, especially if a large volume of the loans they are handling are indirect loans.

Even before the pandemic, indirect lending had been slowing down significantly. According to an article from American Banker, indirect lending growth has declined from double digits in 2017 and 2018 to a mere 3% in 2019. At the same time, the report also shows that delinquency rates for indirect loans decreased every year since 2016. Much of this lack of growth can be explained by auto sales trending downward overall, but the pandemic has exacerbated the problem for credit unions and their members. With so many people still out of work, delinquency rates are bound to rise. Open Lending’s LP Score predicts default rates with more than 99% accuracy! Learn more.

Not only has the global coronavirus pandemic changed the auto lending game, new technology and online services have made an impact on the car-buying process. With showrooms forced to schedule appointments for potential car buyers or close their doors entirely, dealerships have had to quickly change how they operate to stay afloat. Dealerships have had to change their websites from simply advertising and bringing people out to the showroom to handling online sales. For example, in an article from CNBC back in April, Fiat Chrysler set up an online sales program that allows customers to at least partially complete the sales process and have their vehicles delivered to their homes. Want to ramp up your digital auto lending to deliver decisions in a few seconds? Contact us today to learn more!

Car dealers that sell through mobile apps allowing borrowers to arrange their own loans have also made inroads into dealerships and lenders’ territory. The convenience of not going to dealerships or credit unions in-person and talking with a representative to get the kind of loan they want is what many modern car buyers are seeking out. Credit unions and dealerships can no longer ignore the convenience factor.

Finding a balance between risk and reward in your auto lending portfolio is tricky, but Open Lending can bolster your direct and indirect auto lending with accurate predictive data, improve your interest margins and ensure you meet the needs of all your members and dealer partners. Learn more at