WALL, N.J.-Taking a beating from manufacturer leasing deals, First Financial FCU fought back with a 2% cash-back offer that it expects will help return its auto lending to positive growth this year.
CEO Issa Stephan explained that in 2012 there was little the credit union could do to move car loans, and as a result experienced negative auto loan growth due to the abundance of lowball leasing deals in the New Jersey area siphoning away large chunks of car buyers.
"I checked, and of all cars financed in our area about 65% have been leases in the last year," said Stephan. "We have good rates, as low as 3.5%, but you can't beat the lease deals from Toyota, Honda, and now even Hyundai."
Stephan stressed that what's causing the trouble is an expansion of leasing deals here among virtually all automakers. "It used to be just Mercedes, Lexus, and BMW that had the great lease deals, now it is across the board-Ford, GM, you name it."
The amount of leasing activity has surprised First Financial, which decided to use the 2% cash back to see if it could make a dent-and it did, said Stephan. From mid-December through the first part of the year, for 45 days FFFCU increased its auto lending activity, making 45 loans for $750,000 in new balances.
The deal was 2% of the auto loan amount, $100 minimum and $1,000 maximum, payable after the first loan payment was made and within 30 days after receiving the car's title. The offer was good for new and used cars. The incentive was paid via check. "The money could be used to pay down the loan, purchase gas, or however else the member decided."
The promotion cost FFFCU $15,000 in cash incentives, a small price to pay to get auto lending back on track, said the CEO. Stephan said First Financial stepped up advertising of its auto loans, expecting more borrowers to walk in the doors than take an indirect loan. Since the CU pays 2% to the dealer, some of the costs would be offset, surmised Stephan, from not relying as much on indirect lending. Advertising was direct to members via e-mail and statement stuffers, as well as in-branch signage.
Cash-Back To Return
Another reason the credit union introduced the offer was to help members affected by Hurricane Sandy who had to replace totaled vehicles. "It has been a difficult time for a lot of members," said Stephan.
With leasing so strong in this region, would FFFCU add the loan option? Not likely, said Stephan. "We'd have to find the right company, insure the balance, and it's just a lot of risk for the credit union to take on. We'll do the cash-back again in the spring."