By Ray Birch, CU Today
ATLANTA—As car prices continue to hit the gas, more than ever consumers are shopping by payment. What that means, according to one expert, is credit unions need to do a better job of getting the payment information in front of members.
By improving the car-buying process by refocusing on payment, says Tarry Shebesta, head of fintech strategic partnerships and industry relations at automotive marketing firm PureCars, credit unions will not only be able to compete more effectively head-to-head with automakers, they will also build stronger relationships with borrowers.
“Credit unions have always been good about talking with their members about how they can take the manufacturers’ incentive—the cash back—and then come to the credit union for the loan,” Shebesta explained.
But what credit unions have not been so good about, he said, is make it very clear from the outset what that decision will mean in terms of a monthly payment for members.
“That has to be crystal clear to the borrower,” said Shebesta. “Many people now are just looking at that monthly payment and that is how they shop.”
Shebesta said the payment must be made clear on the credit union’s car-buying website, which often only display vehicles and their total price.
“And that decision, as to what their payment will be, when you factor in the dealer cash back and the borrower’s true credit, has to come up quickly, or people will turn away,” said Shebesta. “We have seen that if this process takes too long people will just abandon the process.”
Research conducted by PureCars reveals dealers are currently saying car-shoppers are budgeting based on monthly payment up to more than half the time, whereas prior to the pandemic they were budgeting based on monthly payment less than half the time.
Working With Kemba CU
PureCars is now working with Kemba Credit Union on a shop-by-payment solution. The Cincinnati-based credit union is one of the first cooperatives in the nation to roll out a car-buying website that allows people to shop-by-payment.
“What this site does is take all of that information from the borrower I just spoke about—their credit score, the vehicles they are interested in, and then spits back in a very short time, sometimes seconds, the cars and their monthly payments,” explained Shebesta.
The monthly payment, stressed Shebesta, has to be based on borrowers’ “true credit,” not what people think is their score.
“This is a critical factor in this process,” said Shebesta. “The website has to ask for information from the borrower to get a proper credit score, and then an accurate loan rate can be determined. So, we just ask for just enough information to do a soft pull on their credit and then we get them an answer as to what their payment will be.”
The Camaro, Not Corvette, Budget
But what the website also does is present the borrower with only the vehicles they can afford.
“Kemba has relationships with dealers across their area and their website pulls from the inventory on those lots, even used cars if that is what’s requested,” Shebasta said. “What you don’t want to do is make this process not real for the borrower. If they are shopping for a Corvette, but their credit and financials say Camaro, that is what the site will return—Camaros.
“It’s pretty clear these days, credit unions’ biggest competitors are the captives and their low, low rates and incentives,” Shebesta continued. “Credit unions know they can’t compete with automakers and their low and zero-percent offers. But they are not that far off on rates, which are typically lower than banks’. But credit unions can compete against and win against the captives with a better shopping process, one that focuses on monthly payment.”
Shebesta emphasized the strategy works very well when rates are as low as they are today.
Speed & Convenience
“There is not that much difference in rate between the carmakers and credit unions,” he said. “And when it comes down to payment, that difference gets even smaller. Again, this gets down to speed and convenience for members and helps them shop in the manner in which many are moving today.”
Shebesta added that relationships with dealers remain strong, because if the credit union’s financing cannot return a payment the member needs, the deal then reverts to the dealership’s financing and they get the loan.
“Still, in this case, the credit union’s auto buying website has met the member’s needs,” he said.
This article was featured at CU Today.