Subprime Auto Loan Market Holds Promise

But be careful and don’t stray too far from your current membership base.

November 23, 2012
/ PRINT / ShareShare / Text Size +

How vendors help

Well before matters reach the need for repossession, Boutelle says software such as CU Direct’s Lending Insights is necessary for setting up a subprime lending program.

“The software monitors and maintains every kind of loan, from subprime to prime, from auto to personal to home,” he says. 

CU Direct also works with another company that provides partial default insurance for subprime loans.

Miller agrees that credit unions’ ability to safely provide auto loans to people with impaired credit largely depends on their member base. 

“It should be a customized decision and you should be prepared to have recourse,” he advises. “Get a sense for how and where the car will be used, and begin to evaluate repossession and recovery vendors who can help you recover your assets quickly and professionally should something go wrong.”

AutoIMS provides a technology platform that makes it easy to manage repossession agents, vehicles assigned for repossession, and vehicles assigned for auction sale. 

“So many decisions have to be made about each vehicle during these processes that depending on faxes, emails, and phone calls would make it prohibitive to make subprime loans,” Miller says. “Our system replaces an unmanageable amount of communications and spreadsheets with a system that in many cases allows a credit union to run a one-person auto lending and repossession show.”

To find a repo agent, for example, lenders log into AutoIMS and find who’s close, who’s available, their up-to-date insurance bond information, their performance record, and a side-by-side comparison with other agents in their area.

“Once you use the system to assign an agent, it prompts the agent to send you updates and status reports,” Miller says. “The same thing applies to auction assignments and disposal. The systems finds the closest auction, arranges transport, accesses the auction-provided condition report, makes intelligent repair and pricing decisions, and tracks and reports on performance.”

AutoIMS, an affiliate of the auto auction industry, lists 500 auctions nationwide in its system. 

“A credit union picks which auction it wants to send a car to and then electronically submits all pertinent data to the auctioneer including legal compliance requirements for that auction’s particular state, and other preferences related to selling at auction,” Miller explains. “The credit union can add special requests, such as putting a hold on selling a vehicle until a particular date.”

Even though most repossessed vehicles aren’t of the highest quality, there has been a strong seller’s market over the past two years, he adds. 

“New car sales have dropped as people kept their old cars longer. A low supply of used cars, which now appears to be easing, has allowed auctions to bring high prices on many cars. We’ve even had cases where the sale of a repossessed car not only paid off the debt owed but allowed for a profit.”

Whatever software credit unions use to enter the subprime auto loan market, Boutelle says it’s worth repeating one important rule: “Look to your existing member base for your subprime borrowers.”

NEXT: Collateral Management Systems: The Next Generation

Post a comment to this story


What's Popular

Popular Stories

Recent Discussion

Great article! Unfortunately, most employees don’t feel valued or appreciated by their supervisors or employers. In fact, research has shown that the predominant reason team members quit their jobs is because they don’t feel valued. This is in spite of the fact that employee recognition programs have proliferated in the workplace – over 90% of all organizations in the U.S. has some form of employee recognition activities in place. But most employee recognition programs are viewed with skepticism and cynicism – because they aren’t viewed as being genuine in their communication of appreciation. Getting the “employee of the month” award, receiving a certificate of recognition, or a “Way to go, team!” email just don’t get the job done. How do you communicate authentic appreciation? We have found people have different ways that they want to be shown appreciation, and if you don’t communicate in the language of appreciation important to them, you essentially “miss the mark”. Additionally, employees need to receive recognition more than once a year at their performance review. Otherwise, they view the praise as “going through the motions”. A third component of authentic appreciation is that the communication has to be about them personally – not the department, not their group, but something they did. Finally, they have to believe that you mean what you say. How you treat them has to match the words you use. If you are not sure how your team members want to be shown appreciation, the Motivating By Appreciation Inventory ( will identify the language of appreciation and specific actions preferred by each employee. You then can create a group profile for your team, so everyone knows how to encourage one another. Remember, employees want to know that they are valued for what they contribute to the success of the organization. And communicating authentic appreciation in the ways they desire it can make the difference between keeping your quality team members or having a negative work environment that everyone wants to leave. Paul White, Ph.D., is the co-author of The 5 Languages of Appreciation in the Workplace with Dr. Gary Chapman.

Your Say: Who should be Credit Union Magazine's 2014 CU Hero of the Year?

View Results Poll Archive