Credit unions, and dealerships alike, felt the pandemic's brunt. By working together, mutual customers are more advantaged than ever because of a shared goal to service them better.  -  IMAGE: UNDERNEON STUDIO via

Credit unions, and dealerships alike, felt the pandemic's brunt. By working together, mutual customers are more advantaged than ever because of a shared goal to service them better.


As you read this, the hot, sultry dog days of summer have faded away for another year, and as winter comes into view, so too does a better perspective of how the indirect lending industry and automotive retailers worked together to survive the worst of COVID-19.

Auto retailers continue to prove resiliency, and credit unions, as their lending partners, are proving similarly buoyant and durable.

Credit unions, and dealerships alike, felt the pandemic's brunt, as did almost every other business in America. Activity slowed, pulled inward, and we all figured out how to do more digitally with fewer resources going forward — and our mutual customers are more advantaged than ever because of our shared goal to service them better.

Credit unions strengthened their reserves to be ready for projected loan delinquencies, while dealers upped their online retailing game and home vehicle deliveries to satisfy their newly remote buyers.

But there are bruises. The higher cost of new cars, coupled with a near 40% drop in fleet vehicle sales has resulted in a 14% decline overall in new car sales. Credit unions further felt the brunt as OEMs put zero financing incentives in place over the summer holidays to spur sales resulting in credit union new car volumes being down 19% through July YTD vs. same time in 2019.  

While credit unions may have lost marketshare on new cars YTD 2020, there is a bright spot with used cars, which make up 75% of the auto loans that credit unions make. Through July, credit unions saw a 2% increase in used car loan fundings compared to 2019, helping credit unions gain market share in this key auto segment.

Credit unions continue to be cautious about lending during COVID – tightening credit requirements, taking extra measures to verify employment, and being cautious on how auto loan payment deferrals will play out. 

Inventory of both new and used cars, especially certified pre-owned (CPO), remains a challenge. Locally, credit unions are partnering with car dealerships to sell vehicles that have been returned to the financial institutions. Credit union members that once relied on public transportation or were heavy users of shared rides such as Uber are now entering the market for the first time due to health-safety concerns related to public transportation alternatives.

These consumers are excellent prospects to hear about auto lending advantages through credit unions. Dealers working with local credit unions may consider collaborating with them to reach these individuals, though, admittedly, these buyers will mainly be concentrated in larger urban markets.

The auto lending industry has compiled reserves, some at levels required by state regulations, as a hedge to COVID-related loan payment concessions. Still, the industry won’t know until perhaps the first quarter of 2021 how consumers will embrace these obligations and repay them, or get caught up on payments.

Experian Automotive’s second-quarter auto finance market report wasn’t available at press time, but its market share data for first quarter of 2020 activity over the same quarter last year is telling:

  • Banks were down, 36% from 36.3%
  • Captives were up, 9.2% from 8.1%
  • Finance companies were up, 17.8% from 17.4%
  • Buy Here-Pay Here lending was down, 11.6% from 12.1%
  • Credit unions were down, 25.3% from 26%

In mid-June, Credit Union Times reported an 0.4% uptick in credit union used auto loans. 

One silver lining from the “six-feet-apart” culture emerging from the pandemic is the consumer’s concern about and desire to feel safe when visiting retailers, auto dealerships included. 

Results of a May’s Deloitte survey[1] of chief marketing officers across many industries — reported in June by[2] — found that these CMOs believe customers will place “trusting relationships” as their main priority over other elements, such as low prices and excellent service, over the next 12 months.

These relationships are becoming localized in our credit union markets. Dealers are working more closely with local credit unions, growing tightknit relationships, with more phone calls to get deals done for car buyers.

There were unexpected positives coming from the pandemic. Credit unions are seeing renewed commitment on two fronts: from consumers, whose auto loan payments were deferred, and from auto dealers, who found credit unions to be more accessible and responsive to their Paycheck Protection Program loans.

Credit unions should leverage two favors they’ve extended to both dealers and consumers. They’ve extended payment accommodations to many members who struggled — and are still struggling — through these difficult times. Credit unions were also a “first-responder” for dealers who found them more amiable and responsive in helping them obtain Paycheck Protection Program loans. 

Programs that include two-way chat communication and online financing apps, help dealers connect with consumers more intimately, enabling remote negotiation, F&I product purchases, and secure financing. 

While credit union loan applications were down 5% industry-wide earlier this year as compared to a year ago, by April, the application volume had picked up and remains on a steady rise.

Encouraging as these numbers forecast, credit unions have tightened up underwriting. Rates and loan-to-value ratios will remain most favorable, though stricter income verification is to be expected.

For our dealership partners, I suggest they keep three things in mind for the future:

  1. Continue working with credit unions, using digital solutions that help get cash in the door.
  2. Credit unions’ steady, consistent lending history during previous recessions and economic downturns has them well-positioned as a reliable financing source for dealerships when other lenders pull back or pull out of the marketplace.
  3. Credit unions continue to be a strong force in the auto lending arena and a go-to resource, especially for used car financing. We expect credit unions to continue to gain market share as the economy builds momentum and we head into the first quarter of 2021.  

Auto retailers continue to prove resiliency, and credit unions, as their lending partners, are proving similarly buoyant and durable. Used car retail sale prices were up as of early August, which is hopeful. But struggling new car sales, continued tightness in used car replacement sourcing, and the continued uncertainty of this lingering pandemic remain points of concern. 

The lessons we’re learning on efficiency, satisfying our mutual customers, and providing innovative products and services are certain to keep our industries rolling forward, whatever the headwinds.

Bob Child is COO of CU Direct. CU Direct delivers enterprise lending solutions and technology to over 1,100 financial institutions, 14,000 auto dealers as well as retailers and medical providers nationwide.

[1] “Covid-19and the State of Marketing,” CMO Survey Special Edition, June 2020, Deloitte, Deloitte LLP, Duke

University’s Fuqua School of Business and the American Marketing Association,

[2] “CMOs Dish on Their Customers’ Behaviors During COVID-19,” June 24, 2020,,


Originally posted on Auto Dealer Today