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From the February issue: Credit unions have been grabbing marketshare by dipping into lower credit scores and making more exceptions, a sampling of dealers nationwide told Auto Finance News. As a result, larger banks and other financial lending institutions are missing out on potential borrowers, dealers said.
Lower Valley Credit Union and Numerica Credit Union are “definitely opening up their book of business,” said James Korolev, finance manager at Archibald’s used-car dealership in Kennewick, Wash. The pair of credit unions, plus several other local CUs, have picked up customers with low credit scores, as long as the structure makes sense and the consumer is in a good equity position, he said.
In some cases, though, credit unions will advance as much as 140% of a vehicle’s book value for strong credit quality customers who are upside-down on their loans. That LTV is “way outside” their guidelines, which typically cap out at 125% of book value, Korolev said.
Groveport, Ohio-based Ricart Automotive Group is also seeing credit unions boost their credit appetites. The caveat, though, is that the consumers become members and conduct more business than a single auto loan with the credit union, said Rick Ricart, the dealership’s director of sales and marketing.
“The credit unions really don’t just give an indirect loan and send the payment book and wipe their hands clean,” Ricart said. “They’re getting someone that’s not just responsible to pay a car payment that they don’t know anything else about.” Rather, he said, they’re building a “more intimate relationship” at a faster clip than traditional lenders, he added.
Credit unions also place parameters on membership eligibility, Ricart said, based on where the consumer lives, works, or worships. If a consumer qualifies to be a member of a credit union, when it comes time to take out an auto loan, “credit unions are willing to take on a little more risk because they already have a better feeling about the consumer,” he added.
Source : AutoFinanceNews
