Credit unions provide low-rate financing, and tougher
lending guidelines for some brands
FINANCING
Go deeper with GlobalData
Low-rate financing at credit
unions draws buyers
Car buyers have been lining up for credit
union financing like kids at an ice cream truck on a hot summer
day.
Low-rate loan programmes have drawn potential car
buyers into the dealership, sparking higher-than-expected volume
for some credit unions.
Government Employees Credit Union (GECU) of El
Paso, for one, originated $25 million (£15 million) of auto loans
in June, up from $11 million in May.
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By GlobalDataThe draw: a 3.99 percent rate for 60-month
loans.
“It was only going to be a two-week promotion, but
it was so huge that we’re keeping it all summer,” said Art Perez,
GECU’s lending manager.
More than 250 people financed their purchases with
the 3.99 percent rate; others secured longer-term loans – for 66
and 72 months – at slightly higher rates.
Citizens Equity First Credit Union (CEFCU) also
offered a promo this summer with rates of 3.99 percent for 60-month
loans and 3.49 percent for 36-month loans.
“There is an emotional trigger,” said Greg Trier,
credit manager. “If you’d offer a 4.10 percent rate, there’s a
visual reference breaking 4 percent.
“That does come into play. 3.99 percent is the
lowest rate we’ve had in quite some time. It got people
interested.”
The credit union’s volume shot up to $53 million,
77 percent higher than the $30 million it was expected to draw in.
“It’s a testimonial that there is pent-up demand out there,” he
said.
GTE Federal Credit Union, meanwhile, paired a
low-rate offering with a car-buying consulting service. “The two
combined gave us quite a lift,” said Susan Lowe, GTE’s director of
consumer lending.
GTE originated $22 million of loans during the
promo period, compared with an average rate of $14 million.
Members could qualify for a 4.5 percent rate; they
could shave off another 25 basis points if the loans were set up
with automatic payments. Car buyers also received a $50 fuel
card.
As credit union auto loan volume has increased, so
has car buyers’ credit quality.
“It seems like good quality individuals were
waiting in the wings to buy a car,” said GECU’s Perez. “Our average
credit score on booked loans is 694; it used to be lower.”
During CEFCU’s latest promotion, 59 percent of car
buyers who qualified for the 3.99 percent rate had Fico scores of
710 or higher, Trier said.
Among buyers who secured the 3.49 percent rate,
most put down 30 percent, 40 percent, or 50 percent of the purchase
price, which significantly mitigates the credit union’s risk, he
added.
GTE’s Lowe attributed the hike in credit scores, in
part, to the pullback of GMAC LLC and Chrysler Financial from the
financing scene.
“A lot of these people [previously] went to GM and
Chrysler,” she said. “They’re older buyers, with better credit
scores.”
With the curb in lending by some of the domestic
captives, potential car buyers have increasingly turned to the
credit unions with which they have long-standing relationships.
Those relationships, some credit unions contend,
help keep delinquency levels at bay.
“Members pay us when they won’t pay others,” said
Clare Early, vice-president of consumer lending at Grow Financial
Federal Credit Union. “And members remember: ‘You were there when I
needed you.’”
INDUSTRY TRENDS
Lenders wary of financing
Chryslers
Although Chrysler, Dodge and Jeep
vehicles maintained their values throughout Chrysler LLC’s
short-lived bankruptcy, some lenders are reducing their exposure to
the brands.
Capital One Auto Finance, Chase Auto Finance, Fifth
Third Bank, and Huntington Bank are limiting loan terms and
lowering advance rates on Chrysler vehicles, dealers have
reported.
“If it has a Dodge or Chrysler stamp on it, they’re
not going to offer extended terms,” said DJ Dancer, finance manger
at Jack Diamond Lincoln Mercury in Texas. “Chase won’t give
72-month loans on Dodge, but they will on [Ford brand]
Lincoln.”
General Motors’ Pontiac brand, due to be
discontinued next year, also faces tighter lending guidelines.
“Pontiac is getting restricted to a 100 percent
advance, said Dave Dutcher, finance manager at Harbor Chrysler Jeep
Dodge, in Michigan.
“If a customer wants a Pontiac, and they’re stuck
on Pontiac, we work the deal with a larger down-payment” to offset
the lower advance rate, he added.
TECHNOLOGY
Skip tips: new online weapons
for skiptracers’ armoury
Skiptracers have long embraced the
internet as a powerful tool for finding people. Michele Stuart,
owner of JAG Investigations, offered the following tips to help
skiptracers:
Always click on the “cached” link on a search
engine results page. This link will display the site with the
search criteria that were entered. Clicking on the actual search
result may display a more recently updated web site.
Always profile someone backward, that is, starting
with the oldest information. The individual in question may be
paranoid now about being found, Stuart said, but probably wasn’t
paranoid two or three years ago.
If you have a phone number for someone and need an
address, call restaurants in the skip’s neighbourhood that deliver.
After providing the restaurant with the skip’s phone number,
invariably the order-taker will say something like, “Are you still
at …” and provide an address.
Stuart will try to become friends with a contact on
that individual’s MySpace or Facebook page.
If the friend request is denied, Stuart goes to the
individual’s friends and sends requests. Invariably, some will
accept the request.
She then goes back to the original contact and
submits another request. Seeing that there are mutual friends, the
contact is more likely to accept the request.
