MIAMI-New car sales are coming back, but are credit unions getting their share in new auto loans?
According to CUNA data they are, but attendees at the 2012 CUNA Lending Council Conference who spoke with Credit Union Journal weren't all so sure, with many saying the competition from the captive financing arms right now is too hard to fight.
New car sales are expected to top out between 14 million to 15 million units by year's end, report industry analysts (Credit Union Journal, Sept. 3). According to CUNA and CUNA Mutual Group, CU new vehicle loans are up 5.8% ($3.4 billion) since September 2011.
What may be causing some credit unions to say they are not seeing the increased new car lending activity is the fact many of their car loans are recaptures, offered Mike Long, chief credit officer at the $1.7-billion UW Credit Union in Madison, Wis. He said his CU's aggressive auto loan recapture program is contributing significantly to 40% year-over-year auto loan growth.
"Our numbers show that 5% of our growth this year is on new auto loans, but I think that is deceiving. When we do a recapture, it's often right after a member gets a new car. While our books don't show it, that's really a new car loan."
'Seeing The Shift'
Bill Vogeney, SVP at the $3.7-billion Ent FCU in Colorado Springs, Colo., said Ent is seeing a big jump in new car loans. "We are seeing the shift, about 12 to 15 months ago our activity was 70% used and 30% new. Now it's probably close to 70% new to 30% used."
Vogeney does not attribute the increase to more people in the market buying cars, it's the same segment of shoppers who now see more value in a new car than a late-model used. "Consumers see a difference on window stickers. They are seeing the next generation of fuel-efficient engines and multi-speed transmissions and are choosing new."
Chasing The Recapture Business
Larry Seidl, chief lending officer at Smart Financial CU, Houston, thinks new car loans are coming back, but said his shop is still seeing about 75% used, and that his CU is going after recapture.
Keith Reynolds, community president, CEFCU West, San Jose, Calif., said there still exists a great deal of pressure from captives, particularly on the West Coast, to send deals their way. "The new car market is coming back, and we are seeing a little bit more business from it," said Reynolds, noting CEFCU is charging 1.99% for new car loans for the best credit.
In Mechanicsburg, Penn., the $2.3-billion Members 1st FCU also dropped its best new car rate to 1.99%, explained Fred Ryerse, SVP of lending "We are aggressive, certainly, but I won't climb into that crazy area that gets a lot lower. At 1.99%, profits are already thin."
Jennifer Cowles, VP of real estate lending at American Eagle FCU, East Hartford, Conn., says there has been no increase in new car loans at her credit union this year and that used continues to dominate member activity. "We are in the low threes but that does not compete with the captives."
Subscribers can read related stories by going to www.cujournal. com and typing the following headlines into the search function:
Credit Union's Must Re-Map Their Route In Auto Lending