Hauppauge-based GrooveCar CEO pins hopes on e-coupon biz

GrooveCar, the web-based marketer of credit union car loans, hasbeen feeling the squeeze.

Credit unions racked up huge increases in their auto loanportfolios over the past three years, as traditional banks and theautomakers' so-called "captive" credit services tightened lendingstandards. But with the economy finally on the mend, the banks andthe captives have come racing back, reclaiming half of the auto loanactivity credit unions posted in 2009.

In January, with volume down and his credit union business"dramatically" on the wane, Hauppauge-based GrooveCar's CEO DavidJacobson decided to dip a toe in the red-hot Internet couponbusiness. His deal: Fill out a quick online form, download theattached coupon and take it to your local credit union to save $500off your next car purchase.

The deal took off, with more than 4,000 prospective auto buyersdownloading the coupon. Now, some 50 people fill out the forms andprint out the coupons each day, with more than 30 percent leading tocar sales, Jacobson said.

Farmingville-based Teachers Federal Credit Union has been one ofthe big winners in the coupon program, with 786 Teachers membersprinting out the coupons and 44 of them, or 5.6 percent, followingthrough on a car purchase with credit union financing, according toNancy Orlando, Teachers' senior vice president. Resulting loanstotaled $950,000.

The numbers got Jacobson thinking bigger. A month into the couponoffer, Jacobson decided to launch a freestanding web company calledCU Auto Coupon and take the program national. It kicks off in aboutsix weeks, he said.

Jacobson will continue to offer the service as a value-added tothe 10 Long Island credit unions, which pay him a fee to directbusiness their way. GrooveCar has financing arrangements with morethan 300 area car dealers. He plans to charge credit unions in otherparts of the country. Jacobson wouldn't disclose his pricing, but hetouted the coupon program's success rate and the fact that itcaptures personal and contact information, which is supplied to thelender. Think up-sell, in other words.

Jacobson said credit unions historically have excelled at takingcare of their members, but they sometimes flounder when it comes topitching and selling products.

"Some are not really focused on the ability to be able to callmembers on the phone and sell them on their financing, reallycommunicate in a sales-type environment," he said.

Hauppauge-based People's Alliance Federal Credit Union, which hasoffered the GrooveCar discount since its start, has gathered about100 email addresses of members who clicked on the coupon. Whilethose contacts are valuable, they're not enough for People's tocontinue if Jacobson tried a paid-model here, according to JoanneSteigerwald, the vice president of operations.

"We can gather 100 email addresses for people signing up to do e-statements every month," she said.

But Steigerwald said she is interested in a planned salestraining program, one of several ancillary services Jacobson plansto offer under the CU Auto Coupon banner.

People's Alliance's auto lending fell between 2010 and 2011,according to call report data online. At the end of March 2011, thenew car portfolio totaled $15.8 million, down from $21.1 millionreported during the same time period last year.

Nationally, credit unions controlled 21.75 percent of new-vehicle financing in the first quarter of 2009, compared to 35.58percent for banks and 37.28 percent for the automakers' captivecredit arms. In the fourth quarter of 2010, the credit unions' sharehad plummeted to 9.68 percent, while banks jumped to 45.84 percentand the captives to 42.91 percent.

The changing market is forcing new creativity on those involvedin the credit union auto loan business. Walt Agius, managing partnerat California-based CU Lending Edge, is launching an "automateddecisioning engine" designed to help car dealers better comparecredit union financing to banks and captives. The system also hopesto speed up loan officer decision making.

"You don't have to wait an hour for a credit union to decision aloan," Aguis said.

Jacobson is using some existing staff to launch the nationaleffort but also plans to hire three new staffers. By the end of theyear, he hopes to have 30 credit unions signed up and as many as 600car dealers.

"It makes the credit union stand out," Jacobson said. "It givesthem something other lenders can't offer."