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Credit Unions Dominate the Auto Loan Market

Credit Unions Dominate the Auto Loan Market

If you haven’t joined a credit union and are planning to buy a car, now is that time to climb on board. Credit unions have historically been one of the top spots for auto loans--offering lower than market rates and flexible terms.

Apparently members have been spreading the word about credit union auto loans as Callahan & Associates reported that consumer loan originations increased by 10% during the first six months of 2011--long before Bank Transfer Day hit.  Additionally Callahan states that credit unions own 16.2% of the auto loan market share, which is the highest level in the past 12 months.

The proof is in the pudding as more and more credit unions are emerging as winners in the lending market.  For example, market analysis provider Cross-Sell, Inc. recently named Heritage Federal Credit Union ($407 million, Newburgh, IN) as being the number one vehicle financer in the region. Cross-Sell reported that Heritage FCU claimed 16.2% of the market, trumping 19 other financial institutions.

Steven Bugg, Chief Marketing and Member Service Officer at Heritage Federal Credit Union explains that members and the community turn to Heritage first because they know they will always get a good deal matched with unbeatable service.

“Heritage Federal Credit Union is known as a safe, sound and secure financial institution,” he explains.  “Our marketing and advertising supports the credit union difference as well as the Heritage Federal Credit Union difference.”  

“We also are a local credit union with decisions made by local people that they know and trust.  We pride ourselves on offering exceptional member service to our 40,000 plus members.  Also, the level of personal service and the relationships we have developed over the years makes a big impact with our dealer partners.”

Bugg continues by addressing its ability to think outside the box when it comes to auto lending.

“Heritage Federal Credit Union offers extended terms, is a local lender, and provides exceptional member service to the member and dealer partners.  We listen and look past the numbers during these tough economic times.  We treat our members as owners and not just another number or loan applicant.  Of course competitive rates and aggressive campaigns help too.  Our reputation aids us as we are known as a local leader when it comes to financing of consumer loans--new and used auto loans.”

Heritage Federal Credit Union isn’t alone in its approach to auto loans. Sharon Spring, SVP at San Antonio Federal Credit Union ($2.9 billion, San Antonio, TX)  says that members base a good portion of their decision on trust.

“Our members tell us that they trust that we have their best interest in mind and do not worry about anything hidden in their contract,” she explains.

In addition to appreciating the credit union’s competitive rates, Spring says that the kind of communication they receive from SACU is nothing like what they receive from any other lender.

“They (members) have commented that they want a monthly statement and other financial companies do not provide them,” Spring says.  “They also have quick access to us if they have questions in regards to their loan--no long wait time over the phone or the ability to come in to a branch and speak with someone in person.  Plus they have the ease of paying their loan in many different ways without high costs to do so.” 

“Pounce-able” Auto Loan Campaigns at Local Credit Unions

Thinking about hooking up your loved one (or yourself) with a new or used vehicle this holiday season?  Swing by the local credit union and get pre-approved before hitting the dealership. By far, credit unions provide not only a better deal, but also safety, honesty and enticing incentives.

Heritage Federal Credit Union is running several campaigns, Bugg says.  “First, we are jointly marketing a holiday consumer program with a local dealer where they have bought down the rate with the credit union for their qualified customers (based on credit worthiness) in order to offer lower rates on vehicles 2005 and newer.”  

Additionally, members can nab some holiday dough with Heritage’s second promotion. “Second, Heritage Federal Credit Union is offering a Holiday Cash incentive to our participating dealer finance managers for sending the credit union new qualified members.  For each new member the dealer finance manager will earn $50.  We then have the opportunity to turn these indirect members into ‘true’ credit union members with our extensive onboarding process.”

Heritage FCU isn’t stopping with only two campaigns, Bugg discusses other ways members can earn more money by shopping with one of seven pre-approved dealers. 

“The consumer can come into any of our branch locations and obtain a pre-approval certificate that they then take to their favorite dealer.  The dealer will earn $25 for sending us the deal and the member will earn $50 for financing their indirect deal with the credit union.  Dealers know that when a Heritage Federal Credit Union member visits their location with a pre-approval certificate that the deal has been approved and they do not have to go through the approval process.  They simply send us the contract since we made it easy for them as well as for the member, since the member does not have to go through the approval process again at the dealership.”   

Additional noteworthy campaigns include Idaho Advantage Credit Union ($52.9 million, Boise, ID).  Idaho Advantage is offering auto loans at 3.85%  for both new and used vehicles with no prepayment penalties. McClatchy Employees Credit Union ($16 million, Sacramento, CA) is currently touting its “lowest rates in our history now available on auto loans!” McClatchy’s rates are as low as 2.49% for 24 months on new or 2.79% for 24 months on used.  McClatchy also offers a 0.25% discount for 80% or less financing.

Island Federal Credit Union ($778 million, Hauppauge, NY) is offering a coupon through where the member can save $500 on the next new or used vehicle. GrooveCar is a credit union industry auto buying resource that connects participating dealers with credit union members, offering special resources and advantages.

Auto Loan Experts Offer Insightful Car Buying Advice

Credit union members can take advantage of the sage wisdom passed along by experts.  Bugg advises auto shoppers to do their homework before they purchase a vehicle.  “Use the internet, the Kelly Blue Book or the NADA book,” he says.  “Understand what is part of the deal and don't only look at the rate and term but also look at any fees / pre-payments associated with your purchase.”  

He says, “We like to advise consumers to stop into any of our seven branches and talk to a financial services consultant and get pre-approved.  Consumers should purchase within their means and have a budget that makes sense for them.  The holiday season can be a good time to purchase a new vehicle since dealers offer a lot of year-end incentives to move out their inventory as the new model years are being manufactured and introduced.”

Spring says that members shouldn’t be pressured to make rash decisions.  “If the financing sounds too good to be true, it's probably not,” she adds. “Look for those hidden add-on costs and conditions. Most people focus on ‘rate’ without looking at whether it is convenient, saves you time and give you a peace of mind. Think total cost, not monthly payment. The longer you stretch your term, the more interest you will pay.” 

Regarding the decision of whether to go for the extended warranty, Spring says that consumers should inquire early in the process.  “If you are interested in an extended warranty, ask your financial institution at the time of the pre-approval if they offer one,” she says.  “Many times it is much cheaper than those offered through the dealer (sometimes less than half) and offers the same coverage if not more.”

Additional Resources:

By Gina Ragusa
Published December 5, 2011
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