CUNA Mutual Group’s “Credit Union Trends Report” noted a significant increase in credit union used auto loans in April as dealer and manufacturer incentives begin to wane while service and rate appears to be a more popular choice.
“Many credit union lenders report they are in a more competitive position as manufacturers financing subsidies decline and credit union loan rates continue to fall,” writes Dave Colby, Chief Economist for CUNA Mutual. “The estimated national average credit union new vehicle loan rate of 3.77% is down 78 basis points (bp) since April 2011 and the used vehicle loan rate is down 72 bp to 4.35%.”
Colby adds that used auto lending will continue to be the bread and butter for most credit unions and the “go to” spot for members. “The 5.8% ($6.0 billion) increase in the used vehicle portfolio continues to be a significant source of total credit union loan growth and will be for the foreseeable future.”
Elizabeth Belli, Lending Product Manager at SECU ($2.4 billion, Linthicum, MD) says that overall auto loan growth has been substantial. “SECU's used vehicle financing has always been very strong and our growth year over year has been about 2%,” she says.
Although Belli reports that used auto loans are doing well, new auto loan business is what’s really booming at SECU, up 31% from 2011. Even so, she believes used auto loans are succeeding because of price. “I think people are financing more used cars because they are cheaper than new, interest rates are very low, allowing for a very low payment, and these days, people are willing to finance a car with as much as 100,000 miles on it because the car will probably run another 80,000 to 100,000 miles.”
Credit Union Summer Used Auto Loan Deals Are Heating Up
Another reason why auto loans may have been booming this spring could have something to do with credit union seasonal auto loan campaigns. Typically credit unions unveil a juicy auto loan campaign during the spring, enticing members to go for that new or pre-owned vehicle. Although some deals may have expired, the fun doesn’t have to stop on the first day of summer.
For example, Florida State University Credit Union ($119 million, Tallahassee, FL) offered a three day only used auto buying event its Perry through its partner Autowise Buying Services. The sale featured oodles of pre-owned vehicles onsite at eye popping rates.
Rates started as low as 2.49% annual percentage rate and members who were pre-approved were eligible to receive $250 off the purchased vehicle price.
Belli says that one of the best pieces of advice she can offer to car shoppers is to get pre-approved before you shop. “One of the best pieces of advice I can give readers is to get pre-approved by your credit union and walk into the dealer with an auto check. Doing so makes the whole process go much more smoothly.”
Like Florida State University, other credit unions are finding ways to draw attention to their auto loans. Members of WEPCO Federal Credit Union ($200 million, Oakland MD) can take advantage of rates as low as 1.49% APR this summer on vehicle models between 2010-2012 for terms of up to a 36 months.
Earlier this month Sioux Empire Federal Credit Union ($70 million, Sioux Falls, SD) offered even lower rates during, “Black Saturday” where the credit union preapproved approximately 85 people for roughly $1.7 million in deeply discounted loans on a first-come-first-serve basis.
Members waited in line for the possibility to be preapproved for a rate as low as 0.99%. “Everyone had a great time on Saturday, and many people walked away with some outstanding auto loan rates. The scene was reminiscent of Best Buy on the Friday morning after Thanksgiving. We heard that people started lining up around 3:00 in the morning!” said Collin Long, Sioux Empire Federal Credit Union Marketing Specialist.
In the market for a vehicle, either new or used? Make your local credit union the first stop for a preapproval today. Calculate how much your auto loan payment might cost right now.