Most Indirect Borrowers Will Never Do More Business with You. How to Fix That
By Liz Froment, Contributor at The Financial Brand
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Indirect auto lending has been a growth engine for credit unions, making up 55% of all vehicle loan balances in 2024. But many of the borrowers behind those loans aren’t sticking around.
“According to recent TruStage research, 82% of recent auto loanees worked with the dealership to obtain their loan, so engagement with the actual lender, be it a bank or credit union, is just a small and somewhat anonymous part of the purchase process,” Corrin Maier, vice president, lending business segment at TruStage, told The Financial Brand. “As a result, a meaningful relationship never truly begins.”
Fewer than 1 in 20 of those borrowers ever open another account with the institution holding their loan, though most are open to hearing more from their lender. However, too many institutions don’t have a strategy to reach them.
Need to Know:
- 82% of indirect auto borrowers worked with the dealership, not the lender, and the institution holding the loan is often invisible to the borrower from day one.
- The strongest performers lead with value, using dedicated outbound teams, text messaging, and immediate digital banking enrollment to build engagement before moving to a sales pitch.
- One credit union converted 13% of indirect borrowers into multi-product relationships using structured onboarding and personalized cross-sell campaigns, roughly 2-3x the industry baseline.
- The real measure of success is behavioral migration. A second account opened is a starting point, but earning the role of primary financial institution is where long-term value lives.
Reality Check: Most Indirect Borrowers Don’t Know Who Holds Their Loan
The core problem with indirect lending is often structural. The borrower walks into a dealership, negotiates with a finance manager, and drives off the lot. The financial institution that ultimately holds the loan is never part of the experience.
“The relationship didn’t start with the financial institution. In indirect lending, the dealer is the originator of the customer’s experience. The borrower didn’t choose the financial institution; they accepted the financing offered,” Jennifer Simmons, vice president of growth strategies at ADVANTAGE, a consulting firm for community banks, told The Financial Brand. “The financial institution is invisible in the transaction.”
The awareness gap: Simmons notes most borrowers don’t even register who their lender is. Their monthly payment is the only touchpoint, and it’s often designed to be frictionless. So, there’s no reason to log into an app, visit a branch, or think about the bank at all.
“They very likely don’t even know this loan is with this institution. It was the dealer finance person,” says Ryan Brogan, managing director in Cornerstone Advisors’ client experience and strategy practice. “And there’s a very important degree of inertia you have to overcome — you have to have something compelling for me to give you bandwidth to think about my financial life.”
Unfortunately, the generic welcome letter often doesn’t cut through that inertia. Most outreach, if it happens at all, is a thank you note or document request, and neither gives the borrower a reason to think of the bank or credit union as anything beyond where they send a payment.
Demonstrate Value Before Selling Your Products
The banks and credit unions converting indirect borrowers tend to lead with something valuable and have dedicated teams focusing on building awareness. At some institutions, that means rethinking what the first touchpoint looks like and how quickly it happens.
At Arizona’s Copper State Credit Union, that means skipping the traditional onboarding playbook entirely. “Instead of using a traditional onboarding approach, Copper State CU has found success with immediately offering a quick personal loan option. The offered amount is lower, and the focus is on convenience. The personal loan is accepted with the click of a button, several digital signatures, and the funds are then placed in the member’s account,” says Jenn Wade, chief experience officer at Copper State Credit Union.
Wade calls this a ‘show, not tell’ approach. It demonstrates convenience before introducing the credit union’s story or additional benefits. First contact at Copper State CU happens within 24 hours of loan funding. The customer gets a concierge call from the branch team and an onboarding email with the personal loan offer.
Timing and sequencing are key. Brogan notes the strongest performers are intentional about what they lead with and which channel they use, “a shocking number of institutions don’t have any real engagement with their digital platform,” he says. For example, starting with a text that includes an enrollment link or offers incentives, such as gift cards, can help. “Getting borrowers enrolled in digital banking is a really important place to start as a connection point to be able to present a pre-approval or other offer in the future.”
The first asks customers receive from Copper State CU is a call and email to download their app. “Our app provides ease of use for our indirect borrowers, and we position it less as a comprehensive banking app and more so as a payment app for your auto loan. From there, additional digital onboarding weaves in the full benefits of the app,” says Wade.
Sequencing also matters. A credit card pitch days after someone made a major purchase could fall flat. Another approach is to start by making payments easier, giving borrowers access to tools like credit score monitoring through digital banking, and then activating personalized, pre-qualified offers tailored to each customer, like a personal loan, credit card, or checking account.
“What’s working is segmentation and intentional activation. Institutions that see results identify indirect borrowers as a distinct behavioral segment rather than folding them into general marketing campaigns,” Simmons says. “Conversion improves when the strategy centers on behavior rather than products.”
Where the Numbers Start to Move
The scale of the single-service problem is significant. An analysis of 1,100 credit unions in the CUDL network, representing 64 million members and $46.7 billion in indirect auto loans, found that indirect borrowers are overwhelmingly single-service relationships unless financial institutions actively work to change it.
But the willingness is there. “What might surprise many lenders is that our same research found almost three-quarters of consumers said they were open to hearing more about what indirect lenders can offer,” says Maier. “Financial institutions, unfortunately, often treat indirect lending as a balance sheet strategy rather than a customer acquisition channel.”
The banks and credit unions that do put structured onboarding in place see results. One $1.4 billion California credit union converted 13% of indirect borrowers into multi-product relationships using automated, personalized cross-sell campaigns. Nine percent signed up for a credit card, and 5% opened a checking account. That’s roughly 2-3x higher conversion than institutions without a dedicated onboarding strategy.
Wade measures success at Copper State CU by tracking second-product openings within 60 days and indirect borrower attrition — watching whether borrowers engage and stay. Banks and credit unions can also monitor opening secondary accounts, card usage, and engagement with marketing outreach.
The real metric: Simple cross-sell numbers only tell part of the story. The deeper question is if the borrower’s behavior actually changes. Simmons notes that behavioral migration is a critical tracker. Banks and credit unions should monitor whether these customers are moving their spending and income to the lending institution or staying with their current provider.
“Opening a second account is easy to report. Earning the role of primary financial institution is far more difficult,” Simmons says. “That distinction is where the long-term value lives.”
Turning Loans into Relationships
The bottom line: Indirect lending becomes a growth strategy when financial institutions treat origination as the start of acquisition. The borrowers are already there, and most are willing to engage.
The banks and credit unions that reach them early, with value, clear next steps, and a frictionless path to a second product, are the ones who can turn thin-margin loans into lasting relationships.
