Credit Union Takes Strategic Steps to Optimize Auto Loan Performance

Credit Union Takes Strategic Steps to Optimize Auto Loan Performance

Credit Union Takes Strategic Steps to Optimize Auto Loan Performance

Outreach to Millennials and Higher Risk Borrowers in the Mix, With Call Center Support

While 2016 auto sales through May were up and down, the National Automobile Association continues to believe that sales this year are on pace to reach its 2016 forecast of 17.7 million vehicles.

Whether auto sales reaching experts’ projections become reality or fall short, it’s important for credit unions to maximize any and all opportunities. Especially if sales are soft.

David KelsayWe recently talked to a lending expert with ties to CO-OP Member Center about his credit union’s lending program. David Kelsay, SVP of Lending at Sierra Central Credit Union in Yuba City, California, with assets of $827 million, says Sierra Central CU has implemented a very successful auto lending strategy by seeking new lending opportunities and not taking anything for granted.

Even if auto sales nationally do not reach this year’s projections, he feels confident that with its active marketing and cross-selling programs, coupled with a leading position in the Northern California auto lending market, Sierra Central will achieve its goals.

Attracting Millennials
Sierra Central Credit Union logoOne of the credit union’s key initiatives is to reach out further to Millennials. Sierra Central CU has a first-time auto buyer program coupled with a promotional campaign to attract more Millennial borrowers, said Kelsay.

The Sierra Central CU auto loan program is based on a set of criteria that take into account the fact that young borrowers most likely do not have a loan track record or any significant income, and present a calculated risk that the credit union believes is worth taking.

“We realize they are early entrants into the financial world and probably have little specific knowledge about borrowing money and other aspects of finance that require a track record, such as a FICO score,” said Kelsey. “So, we structured a program that takes into account who they are today without the benefit of a credit score or loan history, and measure that against the potential they have as future members and borrowers.”

The goal, he states, is to bring a new generation of younger members into the credit union to balance the current average age of its membership of 54 years. This is a critical strategic objective of Sierra Central CU’s marketing campaign.

“We recognize the growth potential of Millennial consumers in our market area is off the charts, but these consumers also require a more targeted promotional outreach that will resonate with them and their lifestyle,” said Kelsay.

Higher Risk Borrowers

Along with reaching out to younger consumers, Sierra Central CU has targeted potential borrowers who are older and might have a blemish on their loan record due to the economy, job loss or other disruption.

To this end, Sierra Central utilizes a program offered by Open Lending called Lenders Protection that provides a form of loan default insurance for higher risk direct and/or indirect auto loans such as subprime type loans.

To make these loans pencil out with the associated risk factor, Kelsay says that although Sierra Central CU’s interest rate is the same as a regular auto loan, the loans are structured through Open Lending to compensate for the risk factor and to be profitable.

“We are a very traditional lender and that higher risk portfolio through Open Lending performs well for us with a good return on investment,” said Kelsay. “We are also receiving positive responses from dealers.”

In addition, Sierra Central  has taken another step that has improved its auto loan performance by contracting with a call center – specifically CO-OP Member Center – to handle off-hours lending activity, especially on weekends when a large percentage of auto sales occur.

“CO-OP Member Center has increased our loan activity and the return on investment is better than we ever thought it would be,” said Kelsay. “We are very pleased with the results.”

Carol Cline-PartonAbout the Author

Carol Cline-Parton is Vice President, CO-OP Member Center, a wholly owned subsidiary of CO-OP Financial Services. Cline-Parton can be reached at or (888) 869-5552, ext. 5576.