Citadel’s auto lending revenue jumps 14% after switching point-of-purchase providers.
THE CHALLENGE:
Reduce expenses and grow auto lending portfolio.
Citadel operated a point-of-purchase lending CUSO for nearly thirteen years. After closing the CUSO, Citadel was challenged to make its auto lending program more profitable. It had been using DealerTrack as its indirect lending provider and accrued $30,000 in monthly expenses from application fees, dealer “shotgunning” and paper that did not meet the credit union’s lending criteria. Furthermore, only 23% of the indirect loan applications received was actually funded. Citadel needed a solution that would cost less and allow the credit union to set forth tighter lending parameters for its dealers. During its pursuit to find a solution that would accomplish these goals, the credit union was also seeking solutions that would provide more auto buying services for its members to expand their auto loan portfolio.
THE SOLUTION:
Switch point-of-purchase providers.
Citadel investigated several different solutions prior to making any change to their auto lending program. They decided against continuing to use DealerTrack since they were getting hit hard on expenses from application fees and the inefficiencies associated with dealers submitting all paper types to multiple lenders. They also looked into RouteOne and the issues were the same. After reviewing all options, Citadel decided to convert from DealerTrack to CUDL. Citadel’s decision to choose CUDL was based on three key objectives:
Reduce Expenses. Switching to CUDL gave Citadel the opportunity to save thousands per month on application fees, since CUDL only charges for the applications that are funded.
Increase Efficiencies. CUDL’s point-of-purchase solution also came with DecisionManager, a decision engine that gave Citadel the ability to set its exact lending parameters and criteria for applications submitted by dealerships. With CUDL, Citadel could streamline underwriting by utilizing the feature to automate loan decisoning.
Marketing Solutions. By signing with CUDL, Citadel had immediate access to marketing solutions such as CUDL AutoSMART. Citadel could provide more auto buying value to its community and members by having a co-branded auto research and shopping website. The credit union also saw this has as an opportunity to acquire and strengthen dealer relationships since dealerships are able to post their inventory onto the site. “For dealers in our geographic segment, to have your inventory in front of almost five million people is a no-brainer,” stated Barry Rose, VP of Lending at Citadel Federal Credit Union.
THE RESULTS:
Doubled number of funded loans and saved thousands of dollars.
Citadel converted from DealerTrack to CUDL in the fourth quarter of 2008. Within a year of the conversion, Citadel’s auto loan portfolio grew by 14%. Funding climbed from $170 million in auto loans to $193 million, without any additional staff. Efficiencies also increased. Look to book went from 23% to 50%. And, as of late 2010, 84% of the credit union’s total auto lending paper had a 710 or greater credit score. Two years after converting to CUDL, Citadel’s auto lending market share doubled and the credit union ranked fourth out of all lenders in their regional area. “Since the switch, our plans for portfolio growth have been realized,” Rose stated.
Additionally, the credit union spends less time setting up new dealers since CUDL handles the dealer due diligence and contracting of each new dealership. “Credit unions need to gain an understanding of how much money they can save just by changing their indirect lending program,” proclaimed Rose.
