US Credit Unions Grabbing Larger Share Of Auto-Lending Market
23 März 2009 - 10:20PM
Dow Jones News
Credit unions are grabbing a larger share of the auto-lending
market, a sign that their move to win over consumers locked out of
traditional vehicle loans is taking hold.
Around 25% of auto loans, not including leases, came from credit
unions in February, up from 15% a year earlier, according to
AutoCount data from Experian PLC's (EXPGY)Experian Automotive.
The shift is happening as the global credit crunch has led auto
maker finance arms, particularly GMAC LLC and Chrysler Financial,
to scale back lending to all but the most credit-worthy
consumers.
"It stands to reason that the auto companies are going to see
credit unions and other lenders more as allies rather than
competitors," said David Adams, Michigan Credit Union League
president and chief executive. "We're looking at a transformative
shift in the way new cars and trucks are financed."
Only credit unions saw the number of existing auto loans
increase in the last year, according to Experian. Open auto loans
from credit unions increased by 5% in last year's fourth quarter
compared to a year earlier, while every other type of lender saw
their numbers fall.
General Motors Corp. (GM) and Chrysler LLC, facing the biggest
crackdown from finance arms in which neither company has full
control, have promoted programs to steer customers toward credit
unions for loans. GMAC and Chrysler Financial are both owned by
private equity firm Cerberus Capital Management LP, which also owns
Chrysler.
As part of a deal that began late last year, GM and Chrysler
began offering discounts to credit-union members in exchange for
credit unions making more cash available for auto loans. Around
57,000 people bought a new car or truck in January and February
through the program, Adams said.
He said the credit-union group is in talks with Ford Motor Co.
(F) to join the program, though the auto maker has previously said
it declined because its finance arm was in relative good
health.
While the auto makers benefit from anything that makes credit
available to prospective car buyers, the shift isn't all good news
for the companies or their dealers.
Captive lenders' primary purpose is to help auto companies sell
cars and trucks, so the companies traditionally go to greater
lengths to woo customers with attractive lease deals and
ultra-low-rate financing, helping many consumers buy pricier
vehicles than they could otherwise afford.
Interest rates offered by credit unions, banks and other outside
lenders are typically higher, so auto makers must rely more on
profit-eroding discounts to make the vehicles affordable.
But opening up credit lines is a must for GM and Chrysler as
they struggle to stay afloat on government loans. The auto makers
have said the pullback in lending by GMAC and Chrysler Financial is
a major factor in double-digit percentage sales declines since the
credit crisis took hold last fall.
Meantime, highly regulated credit unions, typically more focused
on used vehicle lending and other consumer loans, have avoided much
of the trouble plaguing the lending industry.
"If and when the captive lenders get healthy, that may make it
more difficult for credit unions to maintain that share," Adams
said. "But that future is a big unknown."
-By Sharon Terlep, Dow Jones Newswires; 248-204-5532;
sharon.terlep@dowjones.com.