Growing Your Auto Lending With Digital Refinance and Recapture Programs

Hands Exchanging Cash and Car Paper
(Last Updated On: July 11, 2022)

What’s a major part of your credit union’s growth strategy? If you’re like most, auto loans are going to be high on that list. Sure, you could go the packaged investment route, leaving zero effort for your team, but that’s not a solution for your whole institution.

Let’s look at the three ways you can book an auto loan (excluding loan participations):

  1. Direct
  2. Indirect
  3. Refinance or Recapture

We’ve talked at length about the first two in the Learning Library. For direct, you learned to embrace your car buying service and staff efforts. Then, you took a critical look at your indirect effort to ensure it was achieving your mission.

To wrap up, you connected it all and discovered the missing link to auto loan growth in a digital-first world.

That’s a lot of optimization and soul-searching for your financial institution! Give yourself a pat on the back. It’s not easy looking inwards and making real change!

You’ve made huge strides in those first two categories, but the third got less attention. Not anymore. This article will help you refocus your refinancing and recapture.  Are you “re-” tired yet? Sorry, it felt like I was on a roll. Get it, roll? Ok, the article is below.

Auto Lending Leading Up to 2022

Car Keyfob
Grab your key fobs for this trip…into the promising future!

Remember Q1 and Q2 of 2020? Probably not fondly. Don’t worry, reminiscing is done. During that time, car sales and loan volume fell dramatically as lockdowns and closures took effect. Some institutions took this time to optimize their contactless capabilities, a very smart move.

By Q3, dealers were equipped to serve buyers to their comfort level. Want to have a car delivered to your driveway and paperwork filed digitally? You got it. Could the member finance with you in that situation? Because sales were growing again, and new normals were starting.

Driven by pent-up demand and people more comfortable with digital resources, Q4 of 2020 and Q1 of 2021 were massive sales/lending periods. In fact, in some cases, they were record-setting.Data Highlights from Experian:

So credit unions like yours were rolling in the coins, right? Some found a new groove, but many struggled, and if that describes you, that’s totally ok. Our goal here is to provide some additional guidance to help you out of that funk.

Reach members when they’re in-market & get strategic about direct auto lending. Grow revenues and accelerate the mission by educating on protection products early in their car buying journey.

Auto Loan Acquisition End-to-End Strategy Cheat Sheet Cover

Credit Union Share of Auto Loans Falls

With over 24% penetration, 2018 was a high water mark for credit union auto financing, according to Experian. Since then, it has fallen to 20%, as of Q1 2021. See, you’re not alone!

Credit Union Share of Auto Loans Q01Y21

Of course, those are loans already financed. So your direct and indirect channels are worthless to acquire them on this round. If only you had a third path to financing…

Doing some napkin math, there appears to be over $1 trillion dollars of potential loan volume available for possible refinance. That’s approximately 50 million loans. I’m sure you’d be fine with just 10,000 of them.

There’s no doubt the market is large, but are they a qualified target audience? Maybe there’s a reason you didn’t finance with them the first time around? Let’s look at why refinancing even exists. Then we’ll connect it to advancing your mission while generating significant revenues.

Why Refinance an Auto Loan?

Percent Signs in Pile Blue Green
Grab those percentages by the slash and reduce!

According to Lending Tree, the average auto loan APR was 9.46% in 2020. Granted, that included everyone and all extremes. On the low side, borrowers with the strongest credit had an average rate of 5.49% while the credit invisible dealt with the burdens of 22.66%.

Even with rate hikes (and more on the horizon), looking at your own rate charts, I bet you can find better options for many of those borrowers. Good thing, because…

 “I don’t want to save money on my car loan payments”, said nobody, ever.

As you know, borrowers who refinance have a good chance of saving money on their loan payments, especially when they choose to do so at a credit union. So why didn’t they go there to start?

Why people don’t finance with their Credit Union

Great question. There are several answers, and I’m sure you have even more from your own experience:

  • Consumers buy (and are sold) based on payment, not the term or rate – (“Seems affordable”)
  • Emotion drives the buying/financing decision process – (“Have to drive that one home”)
  • Convenience makes captive financing easy – (“I’m already at the dealership”)
  • Consumers choose financing based on their own financial knowledge – (“It sounds like a good deal”)
  • Unscrupulous tactics by dealers marking-up interest rates, and also BHPH locations which may turn several loans on the same car – (“No one else will approve me”)

Your credit union can overcome some of these actions by reaching out to in-market members at the start of their car buying journey.

Car Buying Service eBook Cover

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If growing your auto loans is a priority, marketing emails, homepage mentions, car buying service promotion, and mobile banking messaging are all essential to ensure you are top-of-mind for your members. Especially when they’re loving that test drive!

Let’s be honest: Getting a direct loan is easier (and more profitable) than a refinance. But you’ve already missed out on most of the loans on the books right now. So let’s do our best to bring more under your umbrella! And save members money in the process.

While you can refinance anyone, the best strategy is to focus on your own members first.

Why bother with Auto Loan Recapture?

Recapture and refinancing end with the same process. However, while a refinance can apply to any borrower with an auto loan, recapture is targeted only at members of your credit union.

Why not widen the net and just get everyone? Ask your marketing team, or person. All efforts need a target persona. And imagine the cost to reach people who have no current association with your credit union. It’s an untargeted spray of non-personalized content.

You can do better.

Focusing on your members has a few perks. First, they’re your members, and though they have accounts at your credit union, they almost definitely also have relationships with other financial institutions.

Perhaps more importantly, your team feels they have a responsibility to get those loans back. In a sense, weren’t they “stolen” from under your nose by another lender? As a rallying cry for your staff, recapture has a strong message of fighting for your members’ money.

They want to save money. Your financial institution has the loan products to help many do just that. So how do you connect the dots? There are a bunch of strategies undertaken. We happen to know of a far more effective one. Yes, that was a teaser to keep reading.

What’s Refinancing All About?

Coin Piles Decreasing
Beyond amortization, reducing spending makes a real difference.

Whatever it is, credit unions rock at it. Ok, let’s take a closer look. According to TransUnion, credit unions capture the majority of auto refinancing. They continue…

“…at the expense of independent lenders. Credit unions captured 67% of refinanced trades in 2019 and increased their share to 69% in Q1 2020. Banks, captives, and independents have an opportunity to make compelling refinance offers and capture more of this market.”

There’s opportunity for other institution types, just as there is for your credit union. What works for an independent may work for you. It’s all about using a range of strategies that connect with the borrower, deliver the message clearly, and make the process easy.

What makes refinancing happen? Here are some ways you already know, plus some more we believe are the way of the future (and present).


This one is all yours. It’s 100% operated by the credit union and accessible by members through your website (or mobile app). They may discover it or be made aware through targeted marketing.

The application process varies depending on your platform’s capabilities. On one end, it can be a full loan application with the subsequent chat with an underwriter. At the other (preferred) side, members get an instant loan decisioning system requiring few new inputs.

By providing as many pre-populated forms as possible, and removing unnecessary friction points, you’ll see an increase in both applications and booked loans. In conversations with partners, we’ve heard abandonment on bad loan applications can be as high as 90%!

Don’t chase away 9 out of every 10 of your members. Have a friend or family member go through the process. Ask if they would bother for themselves. Easy and fast is key.

Most credit unions will accept refinancing applications from non-members (along with a new account opening). However, it’s your existing members who have the connection and trust. In-house efforts are overwhelmingly targeted at recapture.

Beyond just the loan, a successful recapture opens the door for loan protection products. That’s not just non-interest income and risk reduction for the credit union…these products are part of your financial empowerment mission.

3rd Party Vendor

Chalk Hands Shaking Partners
Real-world equivalent: A chalky fist-bump

Saving members money on their monthly payments is a great way to build relationships…and recapture loans. But now you have to figure out who has loans elsewhere, and of those, which would truly save by switching to your best rates.

Credit scores, term lengths, current APR, and that’s without considering getting all the documents together, then reaching out to the right members with the right offers. So many moving parts…do you even want to attempt that on your own? Probably not.

Good thing there are a bunch of great 3rd party vendors ready to help out. What’s their typical process?

Recapture Process

The first step is to determine your credit union’s objective. Do you want to deepen existing relationships? Perhaps you’re looking to acquire new members. With that information, the vendor will help you define a geographic area (if desired) and applicable FICO scores.

Along with your member database, their own data will inform their prospect outreach strategy. Your members will receive refinance offers (often pre-approved) through the mediums you selected. This can include phone, email, physical mailings, branded landing pages, and more.

We’re big fans of the ones which show the offers inside your online banking or app. Start online, continue online, finish online.

The second step begins once a member has expressed interest in the refinancing offer. Using your underwriting guidelines, the vendor will help with outreach to close the loan. This is also when offers for your protection products get made.

If the member is on board and everything checks out, the finalized loan is sent to your staff (potentially straight through your LOS), required documents get generated by the system (or manually, which seems pretty old-school to us), and a signature request goes to the member.

Click, sign, and (finally) done!

With so many steps involved, it’s a costly endeavor to provide these services. Depending on the vendor, pricing is through a percentage of each recaptured loan, a fixed amount, or a combination of the two.

Naturally, the goal is that costs are offset by ancillary sales. Does this happen often? Results vary for every institution and situation.

Is this the only path for recapture, or has the fintech revolution brought new options to the table? Since the article isn’t done yet, I think you can guess the answer.


Digital Earth
Connectedness can bridge your challenges.

Remember that article CU Geek (that’s me) wrote in 2015 about partnering to enhance your strengths (and address weaknesses)? No? That’s ok. It was a long time ago. Here it is.

The basic premise was that your institution can’t do everything. And even if you tried, you couldn’t be the best at everything. So why bother, especially if someone else does it better? Credit unions are all about collaboration. That should include service enhancement, too!

If the concept of a fintech is new to you, apologies, but you’re already behind the times. They’re a revolutionary force in the world of banking, reshaping “old truths”.

You may recognize some of them through stories on “meme stocks” (Robinhood) or no-fee “banking” (Chime). Turns out, they’re not just creating services to make investing more accessible or out-compete your checking program. Some can help your credit union!

The goal of most fintechs is to take a traditional service and…make it faster and simpler, usually with the convenience of “do-it-anywhere” (meaning, your phone). And it’s not just the front-end that gets easier, it’s the data access in the background. Integration, y’all!

Gotta Catch ‘Em All!

Baseball Mitt and Ball in Grass
Catch more loans with practice and improved systems.

There’s a company that provides your members with the power to discover their auto refinance opportunities and apply for a new loan in just 3 clicks (or taps). Really. We didn’t believe it, either, until seeing a series of live demos.

Able to manage your recapture campaigns (that includes all loans, including credit cards), it gathers all the information about members’ existing debt with almost any lender. All your member has to do is tap a few times and share the last 4 of their SSN.

They see a list of all outstanding auto loans (from other lenders) and can choose which to refinance. Then, they select from a set of pre-filled rates and terms (with clear monthly savings) and…there is no step 3. All that info is instantly populated in your LOS.

Your underwriter simply needs to approve the loan (if you have manual underwriting) and reach out to the member to verify their choice. That’s when they present your protection products and share a document for e-signing.

So you’re thinking, “sure, but there’s a whole lot of paperwork we need to get before finalizing a refinance!” It’s true that a window sticker, payoff amount, and more are all essential. Good thing the system has already pulled all that and dropped it into your loan file.

Even the loan documents are pre-populated, because integration saves time and energy.

Fintechs Seek to Address a “Pain”

Remember, fintechs exist because something was more difficult than it needed to be and a technology solution was necessary. For recapture, the complexities are solved with their solution. Is it right for your credit union? Maybe. We’re happy to chat to see how your credit union can “Lend Like A Fintech”.

Costs are competitive with your normal efforts, performance-based (so no outlay) and calculated on a percentage of the loan amount.

As just one system which can revolutionize your existing process, imagine what it and other fintech alliances could do for your credit union? We all know “easy tech” from everyone’s perspective is only going to grow. Make sure you’re on the forefront for staff and members!

Disclosure: We work with this company and may benefit financially from new accounts.

When You Thought All The Low-Hanging Fruit Was Gone

Apples on Branch
There’s lots of sweet loan volume and member savings at the ready.

Credit unions currently hold over $1 trillion in existing auto loans. How fitting that there’s another $1T of potential loan volume ready for recapture and refinancing. In terms of “low-hanging fruit”, it’s compelling.

We believe member experience is crucial. We also recognize that staff experience needs to be just as good. Too often, the focus is only on the former, and then your team struggles (or gives up entirely). The right technology and strategy approach can solve both.

If you choose to learn more about our example or other options (we honestly don’t know of any that simple and full-featured), know it’s setting the stage for future readiness. In other words, that digital transformation you keep talking about, meeting operational optimization.

Because serving your members is always the goal. We want to make sure you have the best tools and strategies in place to fulfill that mission. Whether it’s financial empowerment, understanding how people actually buy cars, or, making recapture stupid simple, we’re here.

To continue learning more about this and over a dozen other essential topics, Subscribe to the Learning Library today!

Until next time, keep it honest!

Joe Winn - CU Geek

Blogger. Speaker. Part-time Jedi.

Focused on helping your bank or credit union grow in the face of emerging challenges.