Car sales are increasing as the economy improves. As more people have jobs, and many may feel more secure in the work they now have, it's natural for them to finally get to purchases they had put off during the recession. From tiny electric vehicles to giant pick-up trucks, consumers are looking at upgrading their wheels in huge numbers.
Credit unions can offer auto loans of many different kinds and for many purposes. Some pre-approve members for loans and give them a check for that amount, like the State Employees' Credit Union in North Carolina, as Credit Union Times reports.
"By the time they come into a branch, most of our members already know how much they want to spend on a car or what they want their monthly payment to be or both," Stacie Walker, senior vice president at the credit union, told the Times. "[The pre-approved loan] Auto Power lets them get into a car without having to come back into the credit union."
Approved members receive a loan amount that stays in effect for 60 days. With that check, they can go find their preferred used car at their preferred price at any dealership. Members who have used the program say they are happy with the good interest rate and the simplicity of the transactions - both between themselves and the credit union and on the car dealer's lot.
Other approaches
City County Credit Union, a $414 million credit union in Margate, Florida, decided to open its own used car lot in 2004. Now, the lot sells between 40 and 50 cars each month.
"The venture is profitable," CEO Lloyd Gill told Credit Union Times. "We sell a lot of extended warranties, GAP and credit life disability. We sell warranties and GAP with a penetration rate of about 90 percent, and credit life/disability (at) about 50 percent. It helps a lot of members."
The lot offers its own sub-prime auto loan program too. Once the credit union opened its own used car lot, it saw an immediate spike in used car loans, though the credit union does not finance every car it sells. The lot came to be because City County's president at the time thought credit unions compete all the time with dealers over auto loans, so why not become a dealer? Now, the credit union has financing staff on site, and residents or workers in 43 counties can join the credit union right from the lot.
Not every credit union is an aspiring used car dealer, of course, but looking at a variety of approaches to auto loans can help credit union leaders brainstorm about how to increase their own auto loan volumes.