Credit Unions: Friend or Foe?
There may be an answer
Most F&I Managers do not like credit unions. Period. Over the years we have battled with credit unions over rates,
service agreements, delays in loan approvals, etc. We have heard from our customers that some credit union managers
tell them that we are stealing their trades, not giving them a fair price, and imply that we are generally liars and crooks.
Add all this to the loss of income to credit unions and it’s easy to develop a negative attitude towards credit unions, their
managers, and even customers who are credit union members.
The conventional wisdom, taught to us at F&I schools for the past thirty years, has been to convert the customer to our
financing using standard credit union conversions. Most of these methods involve enlightening the customer to several
things wrong with the credit union: chattel mortgages, right of offset, privacy, or any of the other dozen or so reasons that
the customer should not go to the credit union. We measured the results of these conversions in a group of dealerships
in different parts of the country to identify which methods were having the best success. Extensive research, (despite
claims to the contrary), discovered two things:
1. These standard conversions were not effective, when tried.
2. Most F&I Managers weren’t even doing them!
We started to understand the reason for both of the above when we surveyed customers after their F&I experience. One
of the strongest negative customer responses had to do with comments by the F&I Manager about the credit union.
People are extremely loyal to their credit union!
F&I Managers aren’t stupid and quickly figure out that attacking the credit union just makes the customer angry and
doesn’t make them any money. Instead, we give our best value presentation of our products, sell a service agreement,
chemicals, etc., and then hope the credit union manager doesn’t sell a competing product or blow up the products we
If this sounds like reality to you, don’t think you are alone. This has been going on for years. For most F&I Managers, this
has been an area of real frustration.
So what do we do?
There is one answer. A phenomenon is taking place all over the country. Credit unions, to compete with banks for
profitable short-term auto loans, are entering into indirect lending agreements with automobile dealers. This arrangement
works just like indirect lending through your banks. You send in the credit union member’s application for approval,
complete the contract at the dealership, and you write the contract at the normal credit union rate. Most credit unions pay
you a small reserve and let you sell credit insurance, service contracts, chemicals, etc.
Dealers around the country report tremendous success with this program. Credit union members tend to buy more
products than average. Participating dealers love the credit unions they are writing through! Another benefit of being a
preferred dealer of the credit union is that they actually recommend you to their members as a place to buy their cars.
So, how do you get started? Our suggestion is that you take the time to call the credit unions in your area and tell them
you are interested in establishing this relationship. Some will do it and some won’t. But don’t give up. Remember,
somebody in your area will be first. It might as well be you. Also, there are independent companies now setting up dealer
centers for several credit unions to handle indirect dealer paper. Dealers report that this system works well, also.
Sometimes, if you can’t beat ‘em, join ‘em.
George Angus is with Team One Research and Training, a research and training company that specializes in scientific,
research based program development and training programs for the automobile industry. George has trained thousands
of F&I professionals and develops programs and techniques with the top performing F&I departments in the country.
Team One can be reached at 1-800-928-1923 or on the web at www.teamoneamerica.com
George Angus has had over 100 articles published in news and trade publications. This
article is a recent example of George's reporting of information derived from researching,
training, and working with the leading F&I managers in the US and Canada.