LAS VEGAS–The road ahead for auto lending in 2022 is looking pretty smooth, according to one person.
Phil Dupree, chief revenue officer with CU Direct and its sub-brand, Origence, said the company expects the record year it has seen for loans during 2021 to continue in 2022, and that many of its client credit unions are similarly optimistic even as the auto sales landscape continues to shake out from the pandemic.
“We are dedicating our future to our core business, consumer lending and indirect,” said Dupree, adding that as part of that effort the CUSO will be making new investments in its Lending 360 solution.
One area that could see lending growth will be the ability to work directly with some of the largest auto retailers in the country in 2022, thanks to the passage of the new CUSO rule by NCUA. That rule does several things, but in particular it allows a CUSO to make an auto loan—which, along with personal loans, were the two types of loans CUSOs were previously prohibited from doing—directly to members. It’s an issue that has been a priority for CU Direct for some time, noted Dupree, who credited NCUA Board Member Rodney Hood for his efforts to get the rule passed.
Hearing the ‘Noise’
Dupree said CU Direct has heard the “noise” in the credit union market in which some credit unions have expressed fears the company will now compete with those CUs for loans. But that is not the case, he said, especially since the company is owned by credit unions.
And the bigger issue, he said, is that ability to essentially aggregate all those credit unions as one face in front of the online auto buying services.
“The big companies, the online buying services and others, would like to work with credit unions, but they don’t want to work with 50 separate credit unions,” said Dupree.
He said the company is already making plans to work with those services, such as Carvana. “We think we are uniquely capable,” he said. “We already process loans for credit unions today. It’s a core competency of ours.”
During the NACUSO Network Conference at which Dupree spoke with CUToday.info, there was a significant presence from and discussion about fintechs.
“We see fintechs as both partners and competitors,” said Dupree. “It’s really our credit unions that will mandate who they want us to partner with to grow loans. We are in discussions with fintechs. Our whole strategy is to get credit unions more loans.”
As an aside, Dupree said it’s important to vet any fintech partner, as such relationships are about much more than having a “cool idea.”
Dealers Prove to Be ‘Resilient’
But what about the auto sales market itself? Predictions for the demise of auto dealers have been greatly exaggerated, according to Dupree.
“The dealers are very resilient,” said Dupree, noting CU Direct is “deep in the car business” and in constant contact with dealers. “They have had a lot thrown at them. But today they are making more margin than they have made in 20 years.” He expects the dealer growth will continue.
As CUToday.info recently reported, CU Direct President and CEO Tony Boutelle said the company is having its best year ever. Year to date it has made 1.6-million loans for $42.6 billion in overall lending, which is up 14% year over year. When aggregated, the loans made by CU Direct credit unions make the company the number-one auto lender in the country, a position it has held since 2017.
Much of that volume, as credit unions know, has come from used cars. Three quarters of the loans made on the CU Direct platform are for used cars. Credit unions have also been flush with cash that they have been funneling into auto lending.
Flux to Continue, But…
The automobile market is also expected to remain in flux for some time to come, with multiple factors at play. As Dupree noted rental car companies have gone from being “feeders” into the used car market to being “users.” On the new car side, the shortages of computer chips and the resulting manufacturing issues have been well documented.
Dupree expects all of that to eventually work itself out and for new vehicle sales to again pick up the pace, which will have an effect on the used car market.
Looking to the new year, Dupree, who spent 17 years with AutoNation before joining CU Direct about five years ago, expects volume will grow in 2022. While he acknowledged there will always be “knocks” on indirect lending that it doesn’t create full-time, engaged members and that margins are thin, he expects credit unions will continue to embrace the “robust decision engines” behind both the indirect lending platform and Lending360.
“We have scale with the 1,100 credit unions we work with,” said Dupree. “But the one thing we are good at is the connection with the dealer. We really do have a turnkey system. In 2022 I think we will see some more growth. There may be a little wind in our face, but our clients expect to grow next year.”