Welcome to the age-old challenge of credit unions: Maintaining suitable performance while providing quality and low-cost services to your membership, especially those most economically vulnerable.
Mission or Revenue.
Hold up, OR? ¿Por qué no los dos? Mission AND Revenue!
Together, we’ll uncover products which build revenues while advancing your credit union mission. Our focus here will be on auto lending.
Yet benefits continue beyond the members. A credit union which promotes their mission-focused services generates more revenues. Mission-focused revenues. (Which, if you ask us, are the best kind.)
We aim to present familiar products in person and through digital channels with emotion, rather than just the facts of what each does. Hey, wait a second. We made a video series to do just that! Go get them now. We’ll save your place here.
This article covers the following untapped opportunities to enhance your mission impacts:
- GAP (Guaranteed Asset Protection)
- Car Buying Service
- VSI (Vendor’s Single Interest, a CPI alternative)
- VSC (Vehicle Service Contracts)
GAP For More Than That Gap
In our car-dependent society, that rolling machine is many people’s 2nd largest investment. Of course, we all know a car is actually a liability. Recent vehicle pricing insanity aside, cars lose value over time, the most wild being that 10% drop as you take it for a first ride.
Unfortunately, the rate of depreciation doesn’t tend to match the rate we pay off the vehicle. This becomes alarmingly obvious if you deal with insurance companies regarding a totaled vehicle. Black book, blue book…they have their own book. And it can cause real problems.
Anyone dealing with a totaled vehicle is already having a terrible, horrible, no good, very bad day. Hopefully all are ok and hopefully the insurance settlement is high. When it’s well below what’s still owed on the loan, that can put people in a real pickle. Not a yummy one, either.
GAP coverage can help cover that difference, sometimes paying $8,000 or more. What does that mean to a member, effectively eliminating an $8,000 bill? A lot, that’s what. And for those already struggling, this is life-changing.
It’s an easy product to offer, and credit unions price it fairly (Did you know dealer markup could be twice that?), a point our own COO Keith Winn made in a Credit Union Connection article on consumer protection.
GAP, the first Mission-Focused Revenue source we can help you implement.
We thought GAP was simple. Then we dove deeper. Turns out, there’s a lot more to know. Good thing we put it into a 5-step Cheat Sheet! Download now!
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Car Buying Service: For Knowing When Members Want to Buy
It’s ok to be confused. How does buying a car connect to your mission? Well, you can’t fulfill the previous items if members don’t finance with your credit union. And if you didn’t know they were in-market, there’s no chance to engage or educate them.
Sure, a quality car buying service has all sorts of useful ways to simplify the buyer’s journey. It can save members money, compare pricing with others nearby, and research vehicle history, to name a few. That’s great. But most of all, it helps you connect.
Your members will be visiting other services online, and they’re all looking to earn their financing (and ancillary services). Since most people (over 80%) research financing prior to purchase, it’s essential to keep your credit union in their thoughts.
Trust is the #1 reason people researching online choose a financing source. With helpful guidance, you earn that trust, and help them avoid bad financial things happening if bad life things happen. All for less money than captive financing and dealer products.
We have over a decade of experience providing car buying services for credit unions of all sizes. Even if you have one today, let’s chat to ensure it is properly serving your members and institution (and that you have the data to back it up).
Expand your knowledge with the Ultimate Guide to Car Buying Services eBook. 42 pages of valuable content, just for you!
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VSI: Because Sticks Aren’t Mission-Focused
Auto loans have an insurance requirement. However, we know that sometimes, members let that coverage lapse. Deliberate or not, it’s something that needs remedy. Most credit unions use a product called Collateral Protection Insurance to ensure “force-placed” coverage.
With advanced tracking systems, this product works. However, that phrase “force-placed” doesn’t go over well with us. Picture this situation:
Your auto insurance bill is due. With available finances, it comes down to paying for gas, prescription meds, and groceries, or…ok, you know that’s not a decision. So insurance lapses and shortly after, your credit union sends you an aggressive letter warning of consequences.
If you don’t resume your coverage (which you already couldn’t afford), they’ll add a more expensive premium directly onto your vehicle. It gives you zero protection and only benefits them. How does this make you feel? Is your credit union looking out for your financial health?
Doesn’t sound very mission-focused to us.
Vendor’s Single Interest, VSI, provides blanket coverage across your entire auto loan portfolio. The cost is equally borne by all loan-holders, added to loans in the method your compliance team chooses. No mean letters. No hitting people when they’re already down.
Some VSI plans can also provide minimal protection for the members as well. That way, you can work with the member to help regain full coverage instead of punishing them. Which is a lot more credit union-y.
Running the program is also easy (and potentially less costly) for your institution, since it doesn’t require consistent tracking. Even easier when that conversation can start right here.
VSC: Broken Cars Suck (Money From Wallets)
You’ve heard the statistics on emergency funds: That a large percentage of people cannot afford a few hundred dollar expense. Doubtlessly, the pandemic evolved those figures, but the issue continues to exist. Your credit union has a role in reducing unexpected big expenses.
It’s not just the cost of fixing a car. Without reliable transportation, people may be unable to facilitate their daily lives. From work to school to errands, no car means real challenges. (Author’s note: This is also a good reason to shift away from car dependency.)
We call this a “negative financial spiral”. One problem leads to another, and can get out of control fast. A Vehicle Service Contract (VSC, or, Extended Warranty, or Mechanical Breakdown Insurance) can stop the spiral before it begins.
Beyond ensuring people don’t get stuck with large repair expenses, a good plan can also provide a loaner vehicle, while giving your credit union a share of the profits and full control over its operation. In essence, making it just as compassionate as your other programs.
Our company VP, Keith Winn, was one of the first people to introduce VSC into credit unions, so he’s got the insights. A quick chat can ensure your members are getting best-in-class protection while your credit union has the control (and revenue share) you deserve.
You’re already reading about VSC programs. Get the facts for later reference in a quick-look format! Download our 5 VSC Facts Cheat Sheet!
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Drive That (Mission-Focused) Service & Revenue
It’s easy to get stuck in the mindset that your credit union only provides the loan. If that were true, then why even have these other products? Combine sales, education, and financial empowerment to make life better for your members, on their road of life.
We believe the path to credit union success is in following your mission. It’s why we offer our own Mission-Focused Toolkit, filled with tried-and-true ancillary products to boost auto lending volume and revenue. Schedule a conversation to decide how they may fit into your credit union.
Stay close to your members across all their financial decisions and you’ll be well-positioned to help them get the right solutions for their lives. Keep the GreenProfit Learning Library close by subscribing to our relevant (and bimonthly) communications.
And until next time, keep it honest!
Blogger. Speaker. Futurist. Part-time Jedi.
Dedicated to helping your credit union, large or small, deliver mission-focused financial empowerment to your members. And make a positive impact on your community while you’re at it.