We sat down with the panel’s moderator Derica Demint, our vice president of solutions consulting, to talk more about how building positive relationships with auto dealers can help lenders achieve their indirect lending goals.
Dealers are driving indirect portfolios, so having strong relationships with them can help lenders gain new members or customers. The stronger the relationship with the dealer, the more likely they are to send borrowers who come into their dealership back to you, which can help you grow and maintain your member and customer relations.
Banks and credit unions must offer a wide variety of loans to cover all potential car buyers. That means making loans to potential borrowers with thin or no credit files, as well as those with a few dings on their credit reports. Open Lending can help with that.
Another challenge (and opportunity!) with this relationship can be that when a current member or customer comes into a dealership to buy a vehicle the lender may not want to compensate the dealer for making that connection. This is a mistake. Even if you have an existing relationship with the borrower, it is still providing your institution with additional revenue and an added opportunity to serve the consumer. Not offering the dealer some compensation is highly detrimental to the relationship, and they could choose to send that borrower elsewhere.
Derica made an important point when she explained, “If you want to maintain that balance of retaining members and growing members, then you have to have that solid foundation with your dealer partners.”
You need to treat dealers with the same respect and pay the same dealer flat to honor the relationship if you want them to think of you when a non-member or customer walks into the showroom. This dealer flat is typically around 2% of the percentage of the amount financed that the dealer receives as compensation. Although it’s a business relationship, the dealers are human and will look to other lenders if they aren’t feeling respected for their services. Finally, funding loans quickly is important. While the dealer is waiting on the lender to fund the loan, they’re not turning over new inventory. Be flexible and considerate regarding the funding of the loans granted as well.
Your relationship with your dealers is important for growing and maintaining your auto lending portfolio. You must listen to your dealers and be available to them. Remember that a lot of new members and customers can come from indirect lending that the dealers facilitate. Having a strong, positive relationship with these dealers can only help your institution.
Open Lending’s Lenders Protection works with indirect lending, too! Learn more here.